Forum Archive Index - September 2003

["Morgy 40" <morgy40@hotmail.com>]

Hoops

Do the warrants in NZ have a marketmaker as in aussie, i.e is the warrant 
issuer obliged to make a market in the warrant at all times or is it demand 
driven. Re the numbers , sorry mate but you lost me at the first xyz/bca = q 
so I shan't comment on that, perhaps Snoopy may like to do some numbers 
there. The reason I ask is that I have learnt a good strategy for trading 
warrants using the marketmakers obligation to trade, albeit based on a TA 
setup, however it did lead me to an interest in warrants based on that fact.
To moira I ask the question does this lack of obligation to trade, i.e my 
understanding is that there is no specialist/ market maker in options not 
scare the bejesus out of you.
Perhaps also Woody you might like to comment on this as it is this high end 
that is both profitable and can be highly risky to the learner.

Regards

Morgy

>From: "Richard Hooper" <hoop@ihug.co.nz>
>Reply-To: sharechat@sharechat.co.nz
>To: "sharechat@sharechat.co.nz" <sharechat@sharechat.co.nz>
>Subject: [sharechat] Dorchester Pacific's Warrants
>Date: Tue, 23 Sep 2003 23:28:43 +1200 (New Zealand Standard Time)
>
>Hi all happy sharechatters,....
>oh alright..... grumpy chatters too.
>
>Dorchester Pacific shareholders got bonus issue warrants (ex19th Sept) 1:4
>DPCWA and 1:4 DPCWB.
>      On the other channel some writers consensus were, that once the
>warrants were issued the head share DPC would fall back in price. This has
>not happened ,as yet. The demand for scarce stock I suspect is keeping the
>price up.
>      I was particularly interested in the price paid for DPCWA 35cents and
>DPCWB at 40cents, albeit at bugger all volume. I assume there are no
>warrants trading on the market as the buy bid is 36c and sell bid is 35c,
>this pricing is illogical hence the assumption.
>
>If you do the sums many other things on the surface,seem at first, beyond
>belief. DPC last traded today @ $2.03 ( ex), for mathematical purposes say
>$2 (ex warrants).
>
>By Sept 2006 there will be another 10 million ( 5m Sept 2005 + 5m Sept 
>2006)
>to add to the 20million shares on issue, so effectively with both warrants
>all successfully converted @ $1.70, in theory at present day price the DPC
>share is worth $2.55 (if the warrants are worth zero).
>  However the market is seeing this differently at present with the 
>warrants
>worth around say 35c.......35c + $1.70 = $2.05 is what (an) investor (s) is
>seeing at present. If this becomes reality, this values DPC at present day
>price at $3.07.
>
>  So if any investor buys these warrants for say 35c now. The present day
>price (before dilution) has to be $3.07 + interest earned if money in the
>bank say 4% 1.4c x 2 years(or 3) = $3.10. This is the price DPC ( undiluted
>of 2005 Warrants) has to be in Sept 2006 for that investor to break even.
>
>The burning question is ...is DPC going to be worth that amount considering
>that the market only valued the stock at a $1 last year. Answer ...don't
>know.
>
>The facts .......DPC being a small stock usually gets forgotten, hence $1
>around 2001-2002 when it should had been $1.60 at least. At present It has
>lost its forgotten status.The recent price surge from $1.40 - $2.18 and 
>back
>to $2.03 is demand driven. What factor (or factors) is causing the demand?
>
>Factor 1 ...Investors waking up to a hugely undervalued stock in short
>supply.
>Factor 2....Bonus issue of the warrants.
>Factor 3....Selling its pet poodle, Sterling Portfolio Management Ltd to
>Spices (a wholly owned subsidiary of AXA).
>
>I have a feeling Factor 3 is not a key driver in this momentum, BUT, it 
>will
>have the biggest impact fundamentally as Sterling sucked about $2M/annum. I
>will therefore estimated that the 1/2 year result for DPC expected to be
>released in mid Nov 2003 will be $1.7m + the extra saving from sterling of
>$1m = $2.6m ( 2002 ..$1.462m) an increase of 78%.
>
>  DPC management usually has a 40% dividend payout  policy. So, with status
>quo, I estimate, $2.6M /20M shares X 40% = Dividend of 5.2cents (2002..3
>6cents).
>
>Therefore, on my estimated 10cents per year dividend payout on a growth
>share... $3 a share is not beyond belief, and this is after Nov 2003, less
>alone at Sept 2005 or Sept 2006.
>
>DPC has had a remarkable growth period during the last 6 years within the
>financial sector, and with the possible extra money it will receive with 
>the
>warrant conversion ( $17millon),with great management, the future for DPC 
>is
>looking very rosy.
>oop
>Disc:  own DPC, DPCWA, DPCWB

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