Hai Leck

[Drizzt]

thanks jian jian. correct me if i am wrong but 1.2 mil is far less than the ready cash they have isnt it.

[JJW]

That is provided all warrant are converted by Nov 2011 and the eps remains unchanged. But if all warrants are converted, Hai Leck will receive additional cash proceeds of S$33,796,360 and this will add up to the total cash of 49+33=82m, and cash per share will be S$18.1 cts.
There will be another FY earning for Hai leck from now till 30 June 2011 and base on the net profit of 13.5m of FY2010 ( Which HL should be able to maintain or increase ), this will again add another 10m to its cash coffers. Hai Leck management advised during AGM their order book were fully ( over ) booked till 2013 and have to increased capacities to cope with the increaed jobs.
Now warrant is being traded at 0.05, and the convertion price is 0.26. So it is cheaper to buy mother share then warrant to convert, and furthermore mother shareholder is entitled to dividend.
For the warrant holders to convert , share price will have to move up or warrant price moves down.

(Vested-Not an inducement to tarde)

Yep, I am assuming all warrants will be converted, which is probable given that there is still some time to Nov 2011.
You are right on the cash part, it will be interesting to see what they do with it. I don't believe the business requires extensive capital expediture to handle the increased jobs (though I may be wrong). Beats me why they issue so many warrants in the first place.
Anyway, I have not done any meaningful research into HL so not in a position to comment further. The significant number of outstanding warrants was one of the things that stood out in the results announcement. We would do well to keep in mind the future dilution impact when trying to value HL from say, a P/E perspective.

[dydx]

I feel it can be quite terrible for large holders of the 2-year warrants (expiring 24Nov11), as they will have to seriously think about converting them by paying another $0.26/warrant.

The remainimg outstanding close to 130m warrants will have a big dilutive impact on Hai Leck's EPS going forward.

[tonylim]

During last AGM, this question was raised, management advised the order book was so full that they have to expand their facilities to cope with the double-digit growth. Management projected that the revenues will be double by 2015, so capitals have to be in place and will be deployed accordingly in due course. They added acquisitions were posssible in the pipeline.

[Drizzt]

tonylim how do you feel about the competitiveness in this industry?

[tonylim]

All businesses are competitive unless they are monopoly . HL is in the oil & Gas sector and this sector is growing especially oil price will always head North in the long run.
The Cheng and the Lee are major shareholders , they are the biggest warrant holders. Beleieve they will not be so silly to put their money in the company and deposit the cash with the bank for 0.2/0.3% interest, if the monies are not required for business expansion. Another major shareholder MTQ, is also in the related industry. MTQ and HL have already in this field for 30/40 years and MTQ should know why they want to invest in HL.

[dydx]

The senior Cheng and his right-hand man Lee may be good operators, but I guess they could have taken the wrong financial advice from someone in doing the large warrant issue. Due to the issue's large size (130 warrants) and high conversion price ($0.26/warrant), it will be quite tough for most Hai Leck shareholders big and small holding a meaningful stake relative to their own financial resources.

Shareholders and potential investors must and will recognize the coming big dilutive impact the conversion of the 130m warrants have on Hai Leck's EPS. This should exert a certain dampening impact on Hai Leck's share price until Dec11 at least. To me, the conversion of the 130m warrants into new Hai Leck shares is like a knife on the throat of those minority shareholders who may not be able to take a long enough view on their investment.

[tonylim]

The senior Cheng and his right-hand man Lee may be good operators, but I guess they could have taken the wrong financial advice from someone in doing the large warrant issue. Due to the issue's large size (130 warrants) and high conversion price ($0.26/warrant), it will be quite tough for most Hai Leck shareholders big and small holding a meaningful stake relative to their own financial resources.

Shareholders and potential investors must and will recognize the coming big dilutive impact the conversion of the 130m warrants have on Hai Leck's EPS. This should exert a certain dampening impact on Hai Leck's share price until Dec11 at least. To me, the conversion of the 130m warrants into new Hai Leck shares is like a knife on the throat of those minority shareholders who may not be able to take a long enough view on their investment.

For those warrant holders who do not intend to convert can always choose to sell the warrant now , there are always buyers who are willing to buy at 5 cts.

[cfa]

Just curious, Why are people buying warrants @0.05 and they have to top up 0.26 to convert ( 0.26+0.05=0.31) when they only need to pay for the mother share at 0.28 now ? A difference of 3 cents per share , more than 10% premium ?
It is either they are confident the share price will hit higher than 0.31 by convertion date or they are too speculative ?

[yeokiwi]

Just curious, Why are people buying warrants @0.05 and they have to top up 0.26 to convert ( 0.26+0.05=0.31) when they only need to pay for the mother share at 0.28 now ? A difference of 3 cents per share , more than 10% premium ?
It is either they are confident the share price will hit higher than 0.31 by convertion date or they are too speculative ?

Well, this is called leveraging.
By buying 5cts warrant, the investors are hinging on higher mother share price in the future.
For example, mother share goes from 0.28 to 0.48. The warrant price will increase to 0.25.

In absolute term, the increase is the same.
In percentage term, mother increases by 70% while the warrant sees an increase of 400%!!!

But, the other way is equally trued too. If the mother share drops below 0.26, the warrant will be worthless on the last date of warrant conversion.