Relooking new DFI warrant

TWO weeks ago, this column featured the brand-new Duty Free International (DFI) warrant which at the time had yet to list. Trading has since begun and because there is now a market price of S$0.035, it is perhaps timely to revisit the instrument. To recap, DFI warrants were given to shareholders on a 2-for-5 basis in a bonus issue aimed at "rewarding shareholders and providing them with an opportunity to participate in the future growth of the Group".

They are interesting because unlike most other company-issued warrants, which have three-year life spans, the DFI instrument has a five-year life span, which means holders have plenty of time on their side. They carry an exercise price of S$0.43 per warrant and one warrant converts to one share. This means that with the underlying share currently selling for S$0.36, the warrant is "out-of-the-money" by around S$0.07, and assuming a holder was to convert now, the premium he or she would be paying amounts to just over 29 per cent.

In return, holders enjoy excellent gearing of roughly 10.3 - for an outlay of S$0.035, you gain exposure to a stock that costs 10.3 times more.