Friday 29 Mar 2024
By
main news image

Bursa-CN — a new structured call warrant recently issued by OSK Investment Bank — offers investors an alternative route to tap the upside potential in activities on the local bourse.

Having made its debut on Aug 7, Bursa-CN carries a strike price of RM7.20 and is  exercisable at a ratio of 10 warrants to one Bursa Malaysia share. The warrant’s closing price of 17 sen last Friday valued it at RM8.90 (0.17 x 10 + RM7.20) — an 11.4% premium to the mother share, which ended the week at RM7.99.

Bursa-CN expires on Aug 5, 2010, and was issued by OSK at 16.5 sen apiece. It hit a high of 21 sen in the middle of August before dropping to its current level.

Bursa Malaysia’s share price briefly touched its 52-week high of RM8.31 on Aug 10, which was a dramatic rise from its 52-week low of RM4.40 recorded on March 12.

The operator of the local stock exchange is currently trading at a one-year average of RM6.13, far below its 2007 average of RM11.55. The stock soared in the 2007 super bull run, hitting RM16.60 on Oct 30, 2007.

Though it is unlikely that Bursa Malaysia will repeat its feat in 2007, the general view that stock market conditions will improve  next year may lift its share price and hence that of Bursa-CN.

For the immediate term, the majority of analysts do not believe Bursa Malaysia’s share price will rise any further, according to data polled by Bloomberg.

Some 65% of them have a “sell” call on the counter while 25% have a “buy” and the remaining 10% a “hold”.

The 12-month consensus target price for Bursa Malaysia is RM6.25 — about 21.7% off its current level. Nonetheless, some research houses are bullish about the stock.

CIMB Research recently upped its target price to RM10, AmResearch has pegged its fair value at RM8 while Kenanga’s target price is RM9.30.

Nearly a fortnight ago, Bursa Malaysia announced a tie-up with CME Group to collaborate on developing the derivatives business in areas such as trade matching services and product licensing.

The local bourse operator and CME Group — the operator of the world’s largest derivatives marketplace — also have plans to promote the trading of crude palm oil (CPO) contracts among global investors. An agreement is expected to be finalised in the next few weeks.

“We take a positive view of Bursa Malaysia’s move to globalise the trading of its CPO derivative products, which, in our view, will attract more foreign investors to the local derivatives market in the long run.

“This, coupled with our positive take on the market outlook, leads us to maintain our ‘trading buy’ call, underpinned by the potential re-rating catalysts of higher trading value in the equity market that will spur earnings, robust market sentiment that will increase interest in Bursa Malaysia, a rebound in the effective clearing fee rate and improved pipeline of initial public offerings, including those of overseas companies,” says CIMB in a recent research report.

It has retained its earnings forecast for Bursa Malaysia as the tie-up with CME Group “is expected to have minimal impact on the group’s bottom line in the near term”.

The research firm says a robust market sentiment and positive outlook for the stock market have justified the raising of its target FY2010 earnings multiple from 25 times to 30 times, which is on a par with its three-year historical average.

While the current view is that the market may undergo a correction in the near term, the prospects for global stock markets remain bright for 2010.

“Any dip in the price of Bursa-CN may give investors an opportunity to gain exposure to potentially stronger volumes and activities on the local bourse next year,” says a market observer.

This article appeared in The Edge Malaysia, Issue 769, Aug 24-30, 2009.

 

      Print
      Text Size
      Share