Friday, November 27, 2020

Fintec Global Bhd (Rm0.105) and Fintec-PA (Rm0.05)

Fintec announced its quarterly earning on Thursday evening after the end of the trading session.

For quarter ending 30 September, the company is still losing money on its normal business operation, losing Rm3.22 million. However the company made a profit of Rm16.892 million from the sale of its marketable securities but the main bulk of its profit of Rm720.5 million is from 'Fair Value Gain' on its investment securities.

Earning per share is 61.52 sens. Net assets increased from 35 sens to 91 sens a share.

Despite fantastic figures reported, Fintec started today's trading at 11 sens, went to a high of 12 sens and closed the day at 10.5 sens gaining only 1 sen. It shows that investors pay no attention to 'paper gain' unless and until it is realized with solid cash on disposal.

Further checking revealed that the fair value gain was mainly contributed by its holding in Focus Dynamics that has its price increased from 85 sens on 30 June to Rm2.22 on 30 September. The fair value gain for its 517 million (before the 1:3 share split) Focus was Rm708 million. It should be noted that at today's closing price of 65.5 sens ( after the 1:3 share split) for Focus, the fair value lose due to focus at per today is about RM131 million

Looking at Fintec's 10-year chart, since its March's bottom of around 2 sens, it has completed its major wave 1-2.

From the 1-year chart, the 12 sens high recorded this morning is likely to be the end of sub-wave v of wave (i) unless Fintec can move higher next week for a higher sub-wave v.

If Fintec starts to move lower next week, then today's rebound is more likely to be the mini wave 2 of C of major wave 2 that has a potential low of 5 sens. This option is unlikely unless the price of Focus starts to plunge in the next few weeks.

Fintec Global Bhd -ICPS (Rm 0.05)

Fintec-PA, with face value of 8 sens, that will expire on 4/12/2027 has a conversion price of 16 sens before the current on-going Right-Issue. The holders of Fintec-PA are entitled to convert Fintec-PA into Fintec ordinary share by (i) Convert 2xFintec-PA(2x80 sens) to 1xFintec or (ii) Using 1xFintec-PA(80 sens) plus cash of 80 sens for 1xFintec. 

With reference to the Circular issued on 9 October related to the current Right-Issue, click 'Circular' for details, on page 58 & 59, the tentative computation showed that the new conversion price after the Right-Issue is about 11 sens, that is 5 sens lower than the original conversion price of 16 sens. Need to wait for an official announcement from the company to confirm the new conversion price of 11 sens. Rightfully the company should officially announce the new conversion price for all ICPS and Warrants on the Ex-entitlement date of the Right-Issue (on 24 November).

Looking at today's closing price of Fintec (10.5 sens) and Fintec-PA (5 sens), I noticed there is a mismatch in price between the two if I assumed that the final new conversion price for Fintec-PA is 11 sens as computed in the 9 October 'Circular'. 

Since the face value of Fintec-PA is 8 sens and if the conversion price is 11 sens, I can either (i) exchange 11/8=1.375 shares of Fintec-PA for 1xFintec or (ii) I can use 1xFintec-PA (8 sens) plus cash of 3 sens to get 1xFintec. As per today closing price, when Fintec is at 10.5 sens, rightfully the price of Fintec-PA should be (10.5-3.0)=7.5 sens instead of 5 sens. The difference is 2.5 sens and that is 50% of 5 sens. 

I hope my analysis is on the right track, or have I made any mistake? or any wrong interpretation? If I am right, then today's Fintec-PA price of 5 sens is greatly underpriced.

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