Are IFT09 warrants under valued?

[whatsup]

With the under writing and a split payment option are the July 2009 warrants under valued?
They are selling now for .12 while the heads are $1.74 and in my view there should be some leaverage here of at least another .15c.
I have sold the heads for $ 1.74 and bought twice as many July 09 warrants and should gain the extra leverage on the upside, the only down is the missing out on the dividends of .03ps shortly.

[Toddy]

With the under writing and a split payment option are the July 2009 warrants under valued?
They are selling now for .12 while the heads are $1.74 and in my view there should be some leaverage here of at least another .15c.
I have sold the heads for $ 1.74 and bought twice as many July 09 warrants and should gain the extra leverage on the upside, the only down is the missing out on the dividends of .03ps shortly.

Whatsup

The underwriting announcement was only made 10 minutes before close on Friday, so there will be a risk re-rating on the warrants on Monday.

Under valued, they are now.

[Rif-Raf]

they're too close to first expiry date to command a premium. expect there will still be heavy selling pressure on warrants in next fortnight of warrants holders who dont want to cough up the 55c or 162c

[Toddy]

they're too close to first expiry date to command a premium. expect there will still be heavy selling pressure on warrants in next fortnight of warrants holders who dont want to cough up the 55c or 162c

Rif-Raf
Thats the point, they do not expire until May 2010. Who would sell at a discount one day for the warrants to be carrying a premium the next. Any bank would lend punters the deposit now that the warrants have been under-written.

The market was caught on the hop on Friday afternoon. The heads were liquid and moved on the news. The warrants will catch up tomorrow.

Lets see tomorrow who is right.

[whatsup]

Looks like that the " market" has caught on and the warrants are up .02 so far IMHO .18 is a fair price for them, sell the heads and buy twice as mant warrants as they are now under written so there fore NO RISK !!!
23% rise today.

[whatsup]

UP 40 % today !!!

[whatsup]

See ann re ENE which has a big jump which will also impact on IFT GREAT !!!!

[Toddy]

See ann re ENE which has a big jump which will also impact on IFT GREAT !!!!

Yes, IFT is back in play for a number of reasons.

Where are these people dumping the warrants?

[whatsup]

Heads up 2.8% today.
Warrants up 71.4% today so far!!!
Warrants finished UP OVER 81% today, much more to come IMO.

[lissica]

Looks like that the " market" has caught on and the warrants are up .02 so far IMHO .18 is a fair price for them, sell the heads and buy twice as mant warrants as they are now under written so there fore NO RISK !!!
23% rise today.

Not sure what you mean there, or am I missing something about the underwriting?

I thought if the warrants are not exercised before expiry, it becomes worthless? Or does the underwriting mean you will get your money back?

The heads could still go back under $1.62 (*touch wood* it doesn't).

[winner69]

Heads up 2.8% today.
Warrants up 71.4% today so far!!!
Warrants finished UP OVER 81% today, much more to come IMO.

Well done guys, esp Colin who has made a killing according to another thread

Exploiting opportunities when they arise is the name of the game eh

Good times sure to continue with IFT no doubt

[winner69]

Not sure what you mean there, or am I missing something about the underwriting?

I thought if the warrants are not exercised before expiry, it becomes worthless? Or does the underwriting mean you will get your money back?

The heads could still go back under $1.62 (*touch wood* it doesn't).

Warrant holders aren't underwritten .... pay up or they are worthless. The underwriting puts surety around IFT getting the cash from these warrants which underpins ( derisks to some extent) the head share which may have continued to fall if the cash was not forthcoming

Would say underwriting means NO RISK though .... extending the exercise date out a year (for the balance) helped a lot though

Thats how i see it ... might be completely wrong though

[whatsup]

Sorry Winner & lissica, have a quick squwiz at the ift web site under news re under writing of warrants as N Z First Cap have underwritten the warrants to the extent that IFT gets the now .55 due 9/07/2009 , but hay they are now well in the money and with the new payment option they should all be exercised.

While there have a look at the ENE announcement which has come out of the blue at a very handy time and from what I can make out IFTs share is approx $58mil Kiwi if this deal goes through.
things could be looking up for IFT, interesting times as they say.

[QOH]

Has anyone had any paperwork from computershare yet, for paying for the B warrants?

[COLIN]

Has anyone had any paperwork from computershare yet, for paying for the B warrants?

Their communication dated 8/6/09 (which you should have received) stated:
"After 25 June 2009 we will provide you with a further notification of your choices with regards to the Warrants and provide the appropriate exercise forms."

(25 June is of course the date of the Special Meeting to consider the "Instalment Option")

[QOH]

Thankyou Colin.

[Flogs]

This is my first post, so please forgive my ignorance. I have been following this thread and am interested to know if the IFT09 Warrants are tradeable after 10 July 2009, if only the 55 cents as being proposed as a first instalment, has been paid?

[whatsup]

Flogs there is bound to be but we have to await a company announcement, exciting times re the ENE announcement.

[Flogs]

Thanks Whatsup; appreciate your response.

[COLIN]

This is my first post, so please forgive my ignorance. I have been following this thread and am interested to know if the IFT09 Warrants are tradeable after 10 July 2009, if only the 55 cents as being proposed as a first instalment, has been paid?

Flogs: Welcome to the cyberspace equivalent of Lambton Quay street-talk.

FYI: The company's communication of 8 June states, inter alia: "The Warrants may be sold through the NZX until Tuesday 7 July. The sale price will reflect the $1.62 exercise price. They will be tradable again through the NZX from Monday 13 July 2009, provided that the 55 cents has been paid, and it is expected that the market price will reflect that this 55 cents has been paid."

Happy trading/investing.

[Flogs]

Thanks Colin

[COLIN]

I see that today's meeting approved the Deferred Payment proposal for the Warrants.
Just need to marshall my resources now, to pay for the 55c instalment on the Warrants I still have left - have had to sell off some of them, reluctantly, and have been disappointed to see the price drift over the last few days but that was not entirely unexpected given that there will be many holders who are unwilling/unable to stump up the necessary cash.

[COLIN]

ACC continue to hoover up the Warrants - they now hold nearly 9%. Obviously they intend to avail themselves of the Deferred Payment option, giving them strong leverage into the expected continued recovery of the head shares over the next 11 months. They certainly won't be paying the whole $1.62 at this stage, given that there is nothing to be gained by purchasing the Warrants rather than the ordinary shares at this stage, if you intend to exercise the "full payment" option.
This all highlights the lucrative arbitrage opportunity available right now, between the two sets of securities, before the inevitable premium kicks in for the Deferred Payment Warrants.

[whatsup]

Colin , if that is the case the B warrants must be a screaming buy now at these prices?

[COLIN]

Colin , if that is the case the B warrants must be a screaming buy now at these prices?
You've got it, Whatsup. That's why I am holding onto as many of my Warrants as I can - and selling some other less-promising investments to raise the necessary cash to pay the 55c instalment.
I just can't understand why the Warrants are not yet selling at a premium to the share price - surely others can see the opportunity?

[lissica]

ACC continue to hoover up the Warrants - they now hold nearly 9%. Obviously they intend to avail themselves of the Deferred Payment option, giving them strong leverage into the expected continued recovery of the head shares over the next 11 months. They certainly won't be paying the whole $1.62 at this stage, given that there is nothing to be gained by purchasing the Warrants rather than the ordinary shares at this stage, if you intend to exercise the "full payment" option.
This all highlights the lucrative arbitrage opportunity available right now, between the two sets of securities, before the inevitable premium kicks in for the Deferred Payment Warrants.

Why would there be much of a premium? The 2nd instalment date is less than a year away. The total exercise price is 55c+$1.12=$1.67
You miss out on a 3.75c dividend.

So that's 10.75c

10.75c/$1.12= 9.6%

So it costs 9.6% for less than a year of not making the full payment.

Quoted from the Infratil special meeting notice:
Infratil is indifferent between receiving the full value or the value in the two instalments, and believes that the proposed change
is fair to shareholders. The pricing of the two instalment obligations does not transfer value. While the proposed change offers
Warrantholders more time to pay fully, the aggregate price payable increases to $1.67 and Warrantholders do not receive any
dividends until the Warrants are paid in full.

[whatsup]

Liss---,Colin, have a look at PRC warrants v's head shares and there is a premiun there in a commodity share that has all the hazards that are involved , currency, hostile work enviroment, transport problems, shipping, land slides ,human factors to name but a few and yet the are selling at a huge premium.
Ift by comparrison is a share which by all accounts is geared into the world/N Z recovery from a greatly over sold situation and one that should sell at more of a premium than is the case of now.

[lissica]

Liss---,Colin, have a look at PRC warrants v's head shares and there is a premiun there in a commodity share that has all the hazards that are involved , currency, hostile work enviroment, transport problems, shipping, land slides ,human factors to name but a few and yet the are selling at a huge premium.
Ift by comparrison is a share which by all accounts is geared into the world/N Z recovery from a greatly over sold situation and one that should sell at more of a premium than is the case of now.

Not sure what you are saying here?

If you believe the IFT headshares to be grossly undervalued, then picking up the warrants are a great way to leverage into the share. But I fail to see how the partially paid warrants would suddenly command a bigger premium. After 10 July, they will automatically have a 10.75c premium built in.

[winner69]

Liss---,Colin, have a look at PRC warrants v's head shares and there is a premiun there in a commodity share that has all the hazards that are involved , currency, hostile work enviroment, transport problems, shipping, land slides ,human factors to name but a few and yet the are selling at a huge premium.
Ift by comparrison is a share which by all accounts is geared into the world/N Z recovery from a greatly over sold situation and one that should sell at more of a premium than is the case of now.

Those PRC optins are still probably undervalued.

Agree that there is more 'rsik' with PRC options than with IFT warrants ... and that is why when valuing each different volatility figures would be used. PRC heads have a volatility of about 55%-60% (even though implied volatility on current PRCOA pricing is about 40%) whereas PFT heads volatility is 30%

PRCOA has zero intrinsic value at the moment and the 'huge premium' is the time value component of the price .... driven from the 2 years to go and the volatility.

IFTWB on the other hand has half the time to go and much less volatilty and as such one would expect a lower premium (relative to the 'huge premium' PRCOA has)

The IFTWB are in theory undervalued but IFT have complicated and muddied the waters a bit with the part payment option. If we take the part payment out of the equation and say strike price is 167 next year IFTWB has a value around 24 cents (same basis as to how I calcukate the PRCOA and they have always traded at a significant discount to that valuation). So the premium or time value is about 16 cents at a 175 shareprice. As the IFT shareprice rises this time value reduces (also reduces get closer to Exercise date of course) ... with IFT at 200 time value is about 11 cents

When the part payment of 55 cents is made one should (in theory) see the time value be discounted as well .... essentailly saying that going forward after the first payment is made and the IFTWBs start trading again the 'premium' should be about 11 cents .... and reducing as/if the IFT share price increases. IFT still at 175 gives IFTWB theo value of about 74 cents (and remember the market doesn't agree with my PRCOA valuation so might be lower)

All these thoughts exclude next months dividend which as lissica says should be taken into account. If assumed the 3.75 cents is implied in current shareprice than current intrinsic value is 4 cents odd and a 8 cents premium.

So what does rave say ... IFTWB probably currently undervalued to some extent but hard to properly value at the moment .... but going forward don't base what the premium should be on what PRCOA is getting at the moment.

If you do believe in the IFT story still a good way to leverage yourself into IFT ... no doubt

You guys got me tempted to buy heaps of these to make a killing but decided not to mainly because I am not too keen to front up with the 55 cents as well (not that keen on IFT) and probably risking too much to see whether I'd get the 55 cents back. Will keep an eye on after the instalment payments have been made to see if any opportu ities exist.

PRCOA was a different story because throught he rights issue most didn't put any value of the options that came with them. Cost heaps to buy PRC head shares i didn't want but sold at a small profit so essentially was paid to take the PRCOAs

Keep at it anyway ... one needs to have self belief .... you've done well over the last month with these things anyway .... good effort

[COLIN]

Why would there be much of a premium? The 2nd instalment date is less than a year away. The total exercise price is 55c+$1.12=$1.67
You miss out on a 3.75c dividend.

So that's 10.75c

10.75c/$1.12= 9.6%

So it costs 9.6% for less than a year of not making the full payment.

Quoted from the Infratil special meeting notice:
Infratil is indifferent between receiving the full value or the value in the two instalments, and believes that the proposed change
is fair to shareholders. The pricing of the two instalment obligations does not transfer value. While the proposed change offers
Warrantholders more time to pay fully, the aggregate price payable increases to $1.67 and Warrantholders do not receive any
dividends until the Warrants are paid in full.

I agree that, from the Company's perspective, there is not intended to be any transfer of value (although I think your 10.75c should be 8.75c/$1.12 = 7.8%).
However, I see IFT and other similar energy/utility/infrastructure-type companies as representing a worthy repository for my core portfolio holdings, in these turbulent times, and there is plenty of upside to IFT as the general market trends upwards, as I am convinced it will, over the next year; if one accepts that hypothesis, then there must surely be greater gain to be obtained in holding three times the number of Warrants than one would otherwise be outlaying for each share.

[COLIN]

If you do believe in the IFT story still a good way to leverage yourself into IFT ... no doubt



W69: Thank you for your sage analysis.
If I am proved wrong then I expect to be in good company, with the likes of ACC being a substantial holder of the Warrants - surely they do have a little investment acumen, given the multi-billion dollar size of their total portfolio? Lets hope so, but they do make mistakes like the rest of us - including IFT.
I suppose one key worry I do have with IFT is the position of Lloyd Morrison's health. I have a great deal of respect for his business nous (yes, he has made mistakes but he has also made millions) and look forward to his being able to resume his position at the helm again soon.

[lissica]

I agree that, from the Company's perspective, there is not intended to be any transfer of value (although I think your 10.75c should be 8.75c/$1.12 = 7.8%).
However, I see IFT and other similar energy/utility/infrastructure-type companies as representing a worthy repository for my core portfolio holdings, in these turbulent times, and there is plenty of upside to IFT as the general market trends upwards, as I am convinced it will, over the next year; if one accepts that hypothesis, then there must surely be greater gain to be obtained in holding three times the number of Warrants than one would otherwise be outlaying for each share.


Oops, my bad ^_^

[winner69]

Colin ..... for whats it worth if the IFTWBs have a 60% chance of being in the money at exercise date, based on current volatiklity of the heads

[whatsup]

W...69, Why 60% chance with ACC being a big buyer at present and the heads selling for over $1.70 plus why would there be 40% that are not taken up ( remembering that they are now under written)

[winner69]

W...69, Why 60% chance with ACC being a big buyer at present and the heads selling for over $1.70 plus why would there be 40% that are not taken up ( remembering that they are now under written)

Being in the money means IFT shareprice being over $1.67 at exercise date, ie May 2010 ...... all because with a volatility of 60% shares can go down as well as going up

I didn't say that 60% of the IFTWBs would be taken up or 40% not taken up ... as you say they all will even if the underwriter has to front up ... I was saying that there was a 60% probablilty of the IFT shareprice being over $1.67 next May

Its all mathematics but that is what drives option pricing and all that sort of stuff ,,,, so don't worry about it

[whatsup]

W--69, thank you.

[COLIN]

Colin ..... for whats it worth if the IFTWBs have a 60% chance of being in the money at exercise date, based on current volatiklity of the heads
Thanks W69.
I suppose my approach is more of a macroeconomic one. I wouldn't want to rubbish Prabability Theory, it has its uses. I'm trying to think of the name of the Government Statistician who was one of my lecturers at Victoria - many years ago. I have forgotten most of what he told us but I vividly remember his practical demonstrations of Bell Curves, etc. But I also remember the fable of the statistician who got drowned trying to wade across a river, even though he had carefully calculated that the average depth of the river was only 2 feet - he hadn't allowed for the deep channel in the middle.
Given my belief that the global economy will be looking decidedly more positive by this time next year, and that there is a "High Probability" that the recent rally is not a bear rally, I am more than confident that the IFT share price will not be lower than it is now, therefore it "must" be higher than $1.67.
People who are buying the IFTWC Warrants certainly are very optimistic about the future of IFT - the sp has to reach $4.12 for those Warrants to be in the money. As I have stated previously, I haven't quite got the courage to stock up on those!

[winner69]

Thanks W69.
I suppose my approach is more of a macroeconomic one. I wouldn't want to rubbish Prabability Theory, it has its uses. I'm trying to think of the name of the Government Statistician who was one of my lecturers at Victoria - many years ago.

Was that John Baker?

[COLIN]

Was that John Baker?

Yes, I think it was. It was a long time ago - in the mid 1960's.

[winner69]

That be him ... he died a few months ago at the ripe of age of 96 ..... my father told me about him

[COLIN]

That be him ... he died a few months ago at the ripe of age of 96 ..... my father told me about him

I even remember his initials now - JVT Baker. He had the happy knack of making what could have been a boring subject, i.e. Statistics, sound interesting. And I remember him stunning us all by storming out of the middle of a lecture, once, when he considered he wasn't getting the attention he deserved - students were profuse in their apologies.

May he rest in peace.

[whatsup]

SLOOOOOWLY getting crushed , gee I pitty the investors who bought on brokers recondomation at up to .20 per share 2 weeks ago, today they are .05 , they had better pay the contrib to keep their end alive, sallatory lesson here.

[Toddy]

SLOOOOOWLY getting crushed , gee I pitty the investors who bought on brokers recondomation at up to .20 per share 2 weeks ago, today they are .05 , they had better pay the contrib to keep their end alive, sallatory lesson here.

Crushed is not the word I would use. I was a real IFT believer and this exercise has cost me $1.5mil.

I'm sitting at my desk with a bank funded cheque ready to post, but the chances of me actually posting it are now very slim.

[whatsup]

Toddy, As I see it the ACC (who has been the major buyer of late ) are controlling this situation, for all I know they most probably are the under writers of the warrant exercise uptake , with that said if they (ACC) can see great merit in becoming one of the largest holders in IFT then it must have a reasonable future. They have-imho- taken a pounding with some of their investments and wouldnt want to make more mistakes.

[da puntzda]

Interesting depth situation on IFT with just 1300 shares and one seller on 1.66 and then no sellers to 1.71, but IFTWB trading at 3-4 cents, money to be made and lost on this I reckon.

[Caesius]

Interesting depth situation on IFT with just 1300 shares and one seller on 1.66 and then no sellers to 1.71, but IFTWB trading at 3-4 cents, money to be made and lost on this I reckon.

What do you mean exactly?

[Rif-Raf]

chek out the massive turnover in warrants over last few weeks which confirms the conversion has been a major drag on the price. Things will improve once this is out of way subject to what happens in the wider market of course

[Rif-Raf]

What do you mean exactly?

think he means if the 10,000 at166 get taken bit of a gap thereafter

Bids
Quantity No. Price
28,440 2 165
42,640 4 164
3,045 1 162
3,500 1 161
5,000 1 160

Asks
Price No. Quantity
166 1 10,000
167 1 u 0
171 3 21,500
172 2 35,954
174 1 8,000

[da puntzda]

for people considering the worth of IFTWB is the relevant value of the head share more likely to be closer to 1.71 than the current price of 1.66

[Caesius]

Hmmm interesting, it won't show the depth for IFTWB's, just get a "Depth is temporarily unavailable. Please contact your broker if this problem persist." Can't be valued at much now...

[whatsup]

I think that yesterday was the last day for trading of the warrants, correct me if Im wrong

[Caesius]

I think that yesterday was the last day for trading of the warrants, correct me if Im wrong

Ha. That'll be it then.

[winner69]

The aprtly paid ones start trading again on Monday 13th

[winner69]

Somebody wants to buy some of these $1.12 warrants at 10 cents .... whoops gone up to 15 cents now .... go on give them to him or her

The seller of 50,000 at 100 is abit of a dreamer though

[whatsup]

Winn---, what to your mind is fair value here?

[winner69]

Winn---, what to your mind is fair value here?

At todays price of the heads about the 55 cents plus premium of say 12 cents (somewhere between 10 snd 15) gives 67 cents ..... maybe 70 cents to start

[winner69]

One consideration is whether people take into account the upcoming 3-4 cent dividend .... is it already 'built' into the 166 shareorice ... ie heads are really 162 and under water

[winner69]

Buy sell price getting closer .... if you wanted some you can get some for 65 which seems quite a good price with the heads at 172

Adjust for dividend and heads at 168 so essential the WBs at a 10 cent premium which i thought would be about the case

Heads going well at the moment so maybe the WBs are a good buy at this price

[winner69]

Well something gave and the seller finally sold some at 61

Sellers at 68 which probably about right keeping that 10 cent premium intact

[winner69]

Seems like the market hell bent on not having any premium on these warrants ... maybe the cost of having the 55 cents in limbo is too much for some

[COLIN]

Seems like the market hell bent on not having any premium on these warrants ... maybe the cost of having the 55 cents in limbo is too much for some
Winner, I share your surprise. I put something on the IFTWC thread a couple of days ago about my IFTWB position; I am happy to continue to see my warrants go up 3% in value in tandem with each 1% rise in the IFT price, and sooner or later more IFT investors will come to see that they could get "bigger bangs for their buck" by switching to the IFTWB's. Also, with only about 40m now remaining to be exercised, the scarcity factor should enhance their pricing.