Starburst's warrants deserve another look

MOST of the time, warrants will move in tandem to their underlying shares. However today's feature, Starburst Holdings' warrants, on Friday fell when the stock rose. So even though we've featured Starburst's warrants in this column before, this movement suggests the instrument warrants a look.

Starburst's shares on Friday inched up by S$0.005 to S$0.44 but the warrants dropped S$0.019 or almost 10 per cent to S$0.173 on low volume of 40,000. Granted, illiquid trading can sometimes result in price distortions but this in turn does indicate a window of opportunity for traders to exploit.

The warrant bears an exercise price of S$0.25, so it is "in-the-money" by S$0.19 (share price of S$0.44 minus exercise price). Since the warrant costs S$0.173, there is actually a small conversion discount of S$0.017 or 3.9 per cent relative to the share price. Given that gearing is average at 2.54 and expiry is a long way off in June 2021, these numbers certainly make the warrant interesting.