Hibiscus Petroleum in limelight
LAST week, the warrants market was active as investors returned from the Chinese New Year holidays. The overall warrants turnover jumped 124% to RM543.1 million from RM242.0 million in the previous week. Warrants over Malaysian counters stole the show last week, surpassing the Hang Seng Index (HSI) warrants which had been dominating the warrants space for the preceding few weeks.
Malaysian oil and gas (O&G) company Hibiscus Petroleum (Hibiscus) was one of the companies that put up a strong performance last week. On Feb 19, Hibiscus started the week on a bullish note as the share price broke the RM1 mark, soaring 10.1% to close at RM1.04. However, following that, the share price reversed track, falling 7.3% over two days before rebounding 1.0% to close at RM0.975 on Feb 23.
Hibiscus continued its bullish performance on the back of securing a 50% stake in the North Sabah Oilfield from Royal Dutch Shell Plc. Upon completion of the stake purchase from Shell, Hibiscus will double its oil production to 9,000 barrels per day (bpd) from 4,000 bpd. Hibiscus recently posted healthy financial results as its 2Q18 net profit saw an increase of 3.4% to RM11.0 million as its revenue surged 21% to RM76.1 million.
A newly listed call warrant over Hibiscus, HIBISCS-CC, grabbed the limelight last week, emerging as the most popular warrant last week. Bullish investors took home 6.7 million units out of the 106.9 million units of HIBISCS-CC traded on Monday but were seen selling back 9.1 million units on Tuesday. Overall, investors traded more than 253.8 million units as the warrant’s bid price recorded an increase of 16.7% for the week. Among all warrants over Hibiscus listed on Bursa, HIBISCS-CC has the highest exercise price at RM1.40.
Warrants with a higher exercise price tend to have a higher gearing level and a higher level of risk than warrants with a lower exercise price (all other factors held constant). This is because warrants with higher gearing tend to move in greater percentages than those with lower gearing.
Elsewhere, the HSI surged 0.5% week on week to close at 31,267.2 points. Trading in HSI warrants recorded a turnover of RM127.4 million. The most notable HSI warrant was the HSI put HSI-H2W as investors traded 77.5 million units for the week. Due to high demand, this warrant is sold out as investors bought all 16.0 million units of the issuer’s inventory.
Investors should exercise caution when trading the sold-out warrant as the offer price is widened. Investors should also note that in some circumstances the market bid price may be inflated as other investors may be bidding higher than the issuer’s bid price.
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Provided for Malaysian residents’ information only. It is not an offer or recommendation to trade and is not research material. Past performance is not indicative of future performance. You should make your own assessment and seek professional advice.