Speculative frenzy in Pos call warrants

  • Business
  • Tuesday, 22 Mar 2016

PETALING JAYA : Call warrants linked to Pos Malaysia Bhd recorded gains of as much as 3,800% in volatile trading yesterday in a frenzy of speculation by punters despite no new developments from the company, say market observers.

All three call warrants linked to the stock were among the top traded shares on Monday with a combined turnover of 144.17 million shares.

One in particular, POS-CU, rose from half a sen to as high as 19.5 sen in early trading before most the gains evaporated. It closed at 5.5 sen a share, or a gain of 1,100%.

“The movements between the call warrant and the underlying Pos shares were out of sync. Not only did the warrants carry high premiums, they did not move in tandem with the actual shares, which could be due to speculative activity,” says RHB Investment Bank senior remisier Khairul Anwar Harun.

The buying interest in the warrants began last Friday when shares of Pos rose from RM2.42 to RM3.07 in one day, representing a 27% gain. On that day, another call warrant, POS-CV, rose sharply from 7.5 sen to 27.5 sen. It fell 7.5 sen to close at 20 sen yesterday.

However, Pos shares sharply declined yesterday and closed down 31 sen to RM2.76. Despite this, POS-CU and POS-CT closed the day with substantial gains.

These warrants are now trading at a vast premium to the underlying Pos shares given that the exercise prices for the two warrants are above RM5 each.

On the other hand, POS-CV was last traded at a premium of 14.9% against the POS shares based on its exercise price of RM2.77 and two-for-one ratio.

At press time, Pos did not reply to queries by StarBiz as to whether there are any new developments that could have triggered the sharp rise and fall in Pos shares recently.

The warrants related to the stock were all issued by investment banks and not the company itself. While they are supposed to track the movement of Pos shares, the warrants are settled in cash and are not convertible into shares.

Pos Malaysia is 32% owned by DRB-HICOM BHD, whose share price also went up last Friday. It fell 6 sen to RM1.11 yesterday.

According to a March 18 note by Hong Leong IB Research, a key growth avenue for Pos may come from the acquisition of KL Airport Services Sdn Bhd (KLAS) due to the possible synergistic opportunities.

“We are positive on the long term benefits of the consolidation of KLAS and extraction of synergy to diversify and boost earnings potential. However, we expect a gestation period of at least one to two years post-consoldiation given the capex and expansion costs,” it said.

Pos reported a net profit of RM22.53 mil for its third quarter period for the financial year ended March 31, 2016 compared to RM46.05mil a year ago. Revenue for the quarter rose to RM494.63mil from RM358.05mil.

It is worth noting that the strong rally in Pos as well as other blue chips coincided with record inflows into Malaysian equities lately.

According to MIDF Research in a note yesterday, net purchases of Bursa Malaysia equities by foreign funds surged to RM611.2mil last Friday, the second highest one-day increase this year.

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