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Sunday, November 15, 2009

Transpac Industrial Holdings Warrants

Normally, I don't exercise company warrants way before expiry date since it makes no sense to do so, as one would be losing the time value (if any) of the warrant and also locking in the money into a stock when there might be better investment opportunities. Since company warrants (American style ones) allows one to have the option to buy the underlying share at exercise price on or before expiry, one can hold onto it while still be able to participate in the company's share price appreciation.

But Transpac Industrial Holdings (i.e. TIH) warrants gives me something to think about. The company had declared a interim dividend of 40cts per share, which means I will lose out on this big dividend payout if I don't exercise those TIH warrants that I am currently holding in my portfolio. There had been no news from the company about adjusting the warrant exercise price to reflect the big dividend payout, therefore I assume that there will be no change in the warrant exercise price or warrant conversion ratio.

Such a big dividend payout meant that by exercising the warrants, I am paying $1 per share and getting back 40cts per share within a month.

With the above thoughts in mind, I have decided to exercise my TIH warrants way before expiry and convert them to shares before ex-dividend date.

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11 Comments:

Blogger Sanye said...

Hi GhChua,

I wish to express my thank to you. Your post reminded me timely to exercise Transpac warrants. I would have missed the opportunity if I have not read your blog.

Thank you again, and may you have a blessed Christmas and New Year.

Sanye

7:19 PM  
Blogger ghchua said...

Hi Sanye,

You are most welcome. :)

I am glad that my post had helped to remind you to exercise your Transpac warrants before expiry. I also hope that other readers would have exercised their Transpac warrants as well.

I think the dividend amount is too big to miss out and the company should actually send a mail to all warrant holders to remind them to exercise their warrants. Apparently, they did not and I have to call the share registrar personally to request for the warrant exercise form to be sent to me.

If I have an opportunity, I will certainly bring it up to the company on this issue at a later date.

11:23 PM  
Blogger Ben said...

Hi ghchua

I note that Transpac has been initiating capital reduction over the years. This has resulted in significant amount of cash been returned to the investors.

It appears that such moves has not been adopted so far in 2013. Perhaps there is no additional cash flows to be distributed to the shareholders. I also note that the financial health of the company is good. No debt.

Ben


7:08 PM  
Blogger ghchua said...

Hi Ben,

Transpac is more like a private equity fund rather than a listed company. Which means, they will only have big cash inflow when they exit their investments. During normal days, the dividend from their investments will not be able to sustain consistent dividend payouts.

Yes, they do undertake capital reduction when they exit their investments. But, they will also initiate rights issue when they need new capital to do new investments.

Investors in Transpac must be mindful of the above when they invest in the company.

8:04 PM  
Blogger Ben said...

Hi ghchua

Based on the nature of this company, I think that it will be worthwhile to retain some warchest for the possible rights that the company might initiate for new investments in future.

Ben

10:49 PM  
Blogger ghchua said...

Hi Ben,

Point noted. Thanks for the reminder. :)

11:32 PM  
Blogger Ben said...

Hi ghchua

TIH is proposing a interim dividend of $0.05 and 2 years warrants. The ratio is 3 warrants to 1 shares.

http://infopub.sgx.com/FileOpen/30Dec2013.ashx?App=Announcement&FileID=269275

Ben

3:28 AM  
Blogger ghchua said...

Hi Ben,

I guess doing fund management, having scale and good partners are two very important attributes. This also explains why Straits Trading wants to partner with ARA as ARA has the scale and contracts to do fund management which Straits Trading alone might not have.

For TIH, basically it had reached a crossroad since I last attended its EGM. I remember asking them whether they wanted to close down the fund (too small to continue) or to recapitalize and continue with it. They have chosen the latter route and I am happy to continue investing with them.

Highly focused VC/PE fund should not be listed. The market doesn't appreciate seem to these funds as it can be seen from the valuations from the likes of K1 Ventures, Hotung etc. The exit time frame from these funds can be very long and most investors don't like them. Investors also don't like the inconsistent dividend payout.

Hopefully with ASM, TIH can scale to greater heights.

And yes, Happy New Year to you and your family! May you reap more returns from your investments in 2014! :)

8:44 PM  
Blogger Ben said...

Hi ghchua

Thanks for providing your views on TIH.

Happy New Year to you and your family. I wish you boutiful 2014.

Ben

8:59 PM  
Blogger Ben said...

Hi Ghchua

The warrant issue is in progress.

For this round, the amount of money required to exercise these warrants will be substantial for one with lots of mother shares. I believe that the other alternative is to sell the warrants in open market if one does not have enough money to exercise all allocated warrants.

Ben

8:33 AM  
Blogger ghchua said...

Hi Ben,

Yes. If you think you have too much of their warrants, you can consider selling some of them in the open market. However, if you wish to exercise and convert those warrants to shares, do take note that there is a different exercise price for those who convert early (i.e. within the first 6 months upon issue of the warrants) and those who convert late (i.e. after 6 months).

If your intention is to convert, do convert early to avoid paying a higher exercise price.

7:47 PM  

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