New Silkroutes looks like it's on recovery route

GIVEN the caution currently shrouding the market because of North Korea's belligerence towards its neighbours, volume in the warrants segment has dried up considerably. On Friday for example, only seven company-issued warrants were traded, with our most recent feature, SHS's warrants, the most active.

Still, as we have mentioned several times in the past, sometimes the best time to accumulate value is when conditions are quiet and interest is low. Equally valid is to look for warrants for which the underlying shares are trading at new lows. In this regard, one candidate is the warrant issued by diversified oil and gas trader New Silkroutes Group or NSG.

The underlying shares currently sell for S$0.395, which is just off their 52-week low of S$0.35 that was hit in mid-August. The warrants have an exercise price of S$0.30, so they are in-the-money by S$0.095. They cost S$0.14, so the conversion premium is now 11.4 per cent - arguably quite reasonable given that expiry is about 17 months away at the end of March 2019. Gearing, in the meantime, is a bit above average at 2.82.