Rojana’s outstanding warrants.

Rojana (6.85),  now rated as a "strong buy" in my view, does have close to 300 million warrants outstanding.  This was not mentioned in a Bangkok Post favorable write-up recently and yet is worthy of some attention.  The below short analaysis of Rojana outstanding warrants was posted in the Thaistocks.com memberlounge, on April 2 '04. 

1) The conversion price of the warrants are 3 Baht, so its not like Rojana will not get anything when all the warrant holders convert. Rojana will get 3 Baht for each converted share, or over 800 million Baht in new capital, here called equity! And in the meantime, Rojana does not have to pay any dividends at all to these warrant holders.

2) Even assuming all warrants have been converted and shares outstanding goes to 1 Billion, I think Rojana stock still trades at a year 2005 p/e of less then 10. As I assume the earnings contribution to the bottom line from their Ticon shares this year will push EPS over 1 Baht per share (or say 0.80, assuming all warrants convert this year) for this calender year. Rojana so trades at below the p/e average of the SET property sector...and the current dividend yield is considerably higher the average of the sector. So is Rojana's long term growth rate as I think.

Warrants do create dillution and are worthy of understanding, but one always must consider how many warrants are outstanding (in Ticon's and Rojana's case very little) and at what strike price they are convertable at. Often the conversion price is 1, but in this case its better, at 3 Baht per share. (Expiration date on Rojana warrants is not until early year 2009).

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