Viking's new warrant has time on its side

THE latest company warrant to make an appearance was that issued by Viking Offshore and Marine. It started trading last week and so in keeping with our preference of featuring brand-new warrants, when available, it certainly warrants a look.

The Viking warrant was part of a renounceable and non-underwritten two-for-five rights issue announced in May that included one free, detachable warrant for every two rights shares that were taken up.The warrants have a five-year life span, carry an exercise price of S$0.025 and can be exercised at any time from listing until expiry. Since the underlying Viking shares currently trade for S$0.015, the warrants are out-of-the-money, so early exercise is out of the question.

The warrant's present price is around S$0.003, and being out-of-the-money this means they command a hefty conversion premium of about 87 per cent though they do offer a decent five times gearing. According to Viking's original rights offer document, the money raised from the exercise was for: 1) partial repayment of the loan granted by Tembusu Growth Fund II Ltd to Viking LR2, an indirect wholly-owned subsidiary; and 2) for working capital.