Beng Kuang Marine W270904 (Z3RW) appears undervalued when
considering its favourable characteristics: a sufficiently long time to
expiration (more than 2 years remaining), high gearing ratio (25.5/7.5 = 3.4x),
and relatively low premium of 15.69% ((7.5+22)/25.5 – 1) required to exercise
the warrant and convert it to the underlying shares of Beng Kuang Marine (BEZ).
Warrant Premium Calculation
The standard formula for calculating warrant premiums is: (Warrant
price + Exercise price) / Underlying share price = 1 + premium
More concisely: (W + E) / P = 1 + premium
Rearranging this formula, the warrant price W can be
expressed as: W = (1 + premium) × P - E
Based on historical market data, when multiple warrants are
trading in the market, the average premium typically ranges from 20% to 30%.
Valuation Analysis
Given the current parameters:
- Share
price (P) = $0.255
- Exercise
price (E) = $0.22
- Applying
a 25% premium
The estimated fair warrant price would be: W = (1 + 0.25)
× 0.255 - 0.22 = $0.09875 or 9.875 cents
Compared to the current warrant price of 7.5 cents, this
suggests a potential upside of approximately 31.67%, even without any upward
movement in the underlying share price.
Investment Outlook
The warrant price is likely to be appreciated further if the
underlying share price rises. This scenario appears plausible given that Beng
Kuang Marine is considered an undervalued opportunity with:
- Trailing
twelve months (TTM) P/E ratio of 4.4x
- Classification
as a penny stock, which often experiences significant gains during bullish
market conditions like now
Price Target
I estimate the Beng Kuang warrant will reach 12 cents within
6 months, representing a potential upside of 60% from current levels.
Superphang
https://superphang.blogspot.com
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