Retailers key to any shortfall
There will be a cash infusion of eight billion rupees to the John Keells Holdings conglomerate if all outstanding 2016 warrants are converted to shares at the Rs. 149.29 conversion price by next Friday (Nov. 11) but a question mark hangs over whether this would happen given the prevailing JKH share price on the market.
JKH closed on Friday on the CSE at Rs. 151.30, down 60 cents from the previous close with nearly 390,000 shares traded between Rs. 151 and Rs. 151.80. Given the transaction cost on the Exchange of 1.12%, this would have translated to slightly over Rs. 1.69 per share sold at the closing price.
"After paying the transaction cost, a seller at that price would have got Rs. 149.61 per share – just 32 cents over the warrant conversion cost. If he had warrants, convertible on the basis of one share per warrant, selling off at prevailing prices and recovering the shares sold by converting the warrants wouldn’t be much of a profit," an analyst explained.
There will be a cash infusion of eight billion rupees to the John Keells Holdings conglomerate if all outstanding 2016 warrants are converted to shares at the Rs. 149.29 conversion price by next Friday (Nov. 11) but a question mark hangs over whether this would happen given the prevailing JKH share price on the market.
JKH closed on Friday on the CSE at Rs. 151.30, down 60 cents from the previous close with nearly 390,000 shares traded between Rs. 151 and Rs. 151.80. Given the transaction cost on the Exchange of 1.12%, this would have translated to slightly over Rs. 1.69 per share sold at the closing price.
"After paying the transaction cost, a seller at that price would have got Rs. 149.61 per share – just 32 cents over the warrant conversion cost. If he had warrants, convertible on the basis of one share per warrant, selling off at prevailing prices and recovering the shares sold by converting the warrants wouldn’t be much of a profit," an analyst explained.
He believed that institutional and large shareholders of JKH including some warrant holders who bought warrants on the secondary market at one and two rupees will covert.
"But what retailers will do remains open," he said. "Much of it will depend on what the share price is till the end of the week."
What would JKH do if the warrant conversion falls short of the maximum possible?
Unlike in a rights issue, warrants do not allow additional shares to be sold to those who want them. So the company will have to make the best use of whatever it raises by way of the conversion.
The biggest warrant holders as at Sept. 30, 2016 was the Sohli Captain controlled Paints and General Industries with 15.2 million (30.2%) followed by his daughter, Leesha, with 3.9 million (7.8%).
"There would have been few if any changes from the published figures of the quarter ended Sept. 30, 2016 because the warrants stopped trading on Sept. 27," the analyst said.
They were issued free to subscribers of the last JKH rights issue at the end of 2013 and commanded a good price earlier. In the quarter ended Sept. 2015 there was a top price of Rs. 43.80 and a low of Rs. 30 closing at Rs. 36.70. But this year the price was sharply down with a high of Rs. 7.90 and a low of 50 cents closing on Sept. 30, 2016 at one rupee.
Broga Hill Investments, a foreign fund with 10.4% of JKH is its top shareholder followed by Sohli Captain (10.1%) and Paints and General Industries (8.3%).
JKH’s mega Waterfront Development project costing USD 850 million has been delayed following an issue with the Korean contractor. But that has been resolved and JKH Deputy Chairman Ajit Gunawardene went on record last week saying work has resumed and the project would be launched by end 2019 or early 2020.
By then the top team of JKH would have retired with Gunawardene and Finance Director Ronnie Peiris due to leave in Dec. 2017 with Chairman/CEO Susantha Ratnayake leaving a year later.
"But what retailers will do remains open," he said. "Much of it will depend on what the share price is till the end of the week."
What would JKH do if the warrant conversion falls short of the maximum possible?
Unlike in a rights issue, warrants do not allow additional shares to be sold to those who want them. So the company will have to make the best use of whatever it raises by way of the conversion.
The biggest warrant holders as at Sept. 30, 2016 was the Sohli Captain controlled Paints and General Industries with 15.2 million (30.2%) followed by his daughter, Leesha, with 3.9 million (7.8%).
"There would have been few if any changes from the published figures of the quarter ended Sept. 30, 2016 because the warrants stopped trading on Sept. 27," the analyst said.
They were issued free to subscribers of the last JKH rights issue at the end of 2013 and commanded a good price earlier. In the quarter ended Sept. 2015 there was a top price of Rs. 43.80 and a low of Rs. 30 closing at Rs. 36.70. But this year the price was sharply down with a high of Rs. 7.90 and a low of 50 cents closing on Sept. 30, 2016 at one rupee.
Broga Hill Investments, a foreign fund with 10.4% of JKH is its top shareholder followed by Sohli Captain (10.1%) and Paints and General Industries (8.3%).
JKH’s mega Waterfront Development project costing USD 850 million has been delayed following an issue with the Korean contractor. But that has been resolved and JKH Deputy Chairman Ajit Gunawardene went on record last week saying work has resumed and the project would be launched by end 2019 or early 2020.
By then the top team of JKH would have retired with Gunawardene and Finance Director Ronnie Peiris due to leave in Dec. 2017 with Chairman/CEO Susantha Ratnayake leaving a year later.
www.island.lk
No comments:
Post a Comment