Tuesday, 20 January 2015
Inari Rights Go Ex-ed
Inari's rights issue (8:1) + free warrants (1 rights share : 1 warrant) are ex-ed today. Yesterday's closing price was at RM2.87.
So Inari's share price is adjusted to RM2.64 today, which is 1sen lower than RM2.65 calculated by RHB.
How to calculate the ex-ed & adjusted share price?
As we know, we actually get nothing free from corporate exercises like free warrants, bonus issues etc, as the share price will be adjusted accordingly on the ex-date.
That means what we own before and after the corporate exercise will be the same.
Lets say if I have 8 Inari shares, I will be entitled to 1 rights share and 1 "free" warrant.
I have to pay RM1.50 for 1 rights share.
Inari's share price closed at RM2.87 before ex-date.
My cost is: (RM2.87 x 8) + (RM1.50 x 1)
After ex-date, I will have 9 Inari shares and 1 "free" warrant.
Lets say P = adjusted Inari share price after the corporate exercise. So the warrant price should be (P - RM2.00), as its exercise price is RM2.00.
As before = after, thus (RM2.87 x 8) + (RM1.50 x 1) = (9 x P) + (P - RM2.00)
P = RM2.646
Theoretically its new warrant price should be 64.6sen.
I'm actually not too sure whether my layman style calculation is correct or not, but the outcome seems to match.
According to RHB, Inari's fully enlarged share base upon completion of rights and new warrants will be 804.5mil, which is 28% more than 629.6mil currently.
So there will be a significant earning dilution once the new warrants which expires in 2020 are fully converted into Inari shares.
However, just look at RHB earning forecast for Inari until FY17 (Jun-17). Its net profit is expected to grow more than double in 3 years from FY14 to FY17!
Inari's financial results forecast by RHB
With its rather aggressive expansion plan which include a new production space in Bayan Lepas which will start to contribute soon, I am confident that Inari can continue to produce better results for the next few years.