Company Background – Hovid Berhad
Their globalization corporation stemmed from a humble herbal stall. Along with its rich heritage, Hovid (formerly known as Ho Yan Hor) carries with her years of invaluable experience in the pharmaceutical industry. Dating back to 1945 when the business was first established, Hovid’s only commodity was Ho Yan Hor herbal Tea, concoted by its founder, Dr. Ho Kai Cheong. The popularity of the tea soon made it a household name in Malaysia.
Current Price Trend – Hovid Berhad
Since Dec 15, its share price has trended lower, currently at the edge of the lower bound of the Bollinger Band. Consequently, this may lead to potential rebound in the share price. In respect of analysts’ price target of Hovid, this ranges from RM0.43 till RM0.555 (based on year 2015):
It appears that there is room for potential price appreciation for Hovid.
Trading Opportunities Using Hovid Warrant (“Hovid-WB”)
One way of capitalising on the potential rebound of Hovid is to trade via its warrants Hovid-WB, which are currently trading at zero warrant premium:
|Price (MYR)||0.1800||Implied Gearing||1.766||Conversion Ratio||1 Share : 1 Warrant(s)|
|Premium (%)||0||Simple Gearing||1.766||Expiry Date
|05 Jun 2018 (759 days)|
|Outstanding Warrants||330,398,629||Underlyings (Price)||HOVID (0.415)|
|Exchange Code||7213WB.MY||ISIN Code||MYL7213WBS61|
Based on a simple desktop analysis, the following relationship is established between the share prices of Hovid-WB and Hovid:
Based on the above statistical relationship:
Share price (Hovid-CB) = -0.09811 + 0.8244 x (Share Price of Hovid)
Currently, it appears that Hovid-CB’s share price of RM0.235 is relatively lower than its forecast value of RM0.244, with a 95%-confidence interval of RM.213 – RM0.275.
If Hovid’s share price increases from its current price of RM0.415 to:
- RM0.43: Hovid-CB -> RM0.26
- RM0.45: Hovid-CB -> RM0.27
- RM0.48: Hovid-CB -> RM0.30
- RM0.51: Hovid-CB -> RM0.32
- RM0.55: Hovid-CB -> RM0.36
The good thing is that Hovid-CB expires in Jun 2018 (approx. 2 years from now). Ample time to ride through the market volatility. However, we need to be mindful of the impacts resulting from the implementation of TPPA on the pharmaceutical sector (http://www.theborneopost.com/2015/10/15/tpp-to-impact-pharmaceutical-sector/).
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