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> LYN stock market FAQs & Guide, T+3, Dividends, commissions/fees, etc...

kmarc
post May 23 2009, 09:14 PM, updated 8y ago

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"Rights Issue" in progress thumbup.gif


Hi guys. After discussing with Cherroy, I have decided to do a noob guide for our stock market section. As I’m just a baby ikan bilis in stocks and I'm not in the financial field, would appreciate it if you guys could help me out.

My plan is to make it as simple as possible, and cover common issues that are FREQUENTLY asked.

Index

Part 1 - T+3
Part 2 - Dividends
Part 3 - Commissions & brokerage fees
Part 4 - Taxes and stocks/dividend
Part 5 - Warrants - The confusion, the headache and the frustration
Part 6 - Warrants - How and when to trade warrants?
Part 7 - Rights Issue

Post #5 - Trading accounts
Post #6 - Can I ask when is the best time to buy stocks or the TP for a stock?
Post #7 - etc
Post #10 and above – for noob to ask questions (including me!!!!)

Going to start off with T+3 first. Please help or give opinion. No spamming please.

Note : Let me draft out the rough outline on T+3 first then you guys can comment/help/give opinion. Thx!

This post has been edited by kmarc: Mar 30 2011, 09:18 PM
kmarc
post May 23 2009, 09:16 PM

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Part 1 - T+3

Content ---------------------------------------------------

a) What does "T" and "+3" mean?
b) Details on T+3 (the day of settlement)
c) Why are investors sometimes afraid of T+3?

-------------------------------------------------------

What does "T" and "+3" mean?

Refers to the term “Settlement period”

"T" = Transaction @ Trade day/date (the day you bought or sold a stock)

"+3" = 3 working/business days after "T". That’s the day when you have to settle your transaction

--- If you bought shares, you have to make payment on day 3
--- If you sold shares, you must deliver the stocks on day 3

T+3 is only relevant to you if you decide to hold on to the stocks. If you sold your stocks on any day prior to T+3, then it is a contra trade. The rest of the guide will assume that you plan to hold on to the stocks you bought.

Important:
Note that it is 3 working/business days and if there is a holiday in between, it is not counted

In generally, those days when our stock market (KLSE/KLCI) is open are considered "business" days. That means, even if your state is having a holiday, doesn’t mean KLSE/KLCI is not opened!!!

Example

user posted image

For Trade 1 – Trade on Monday, settle on Thursday
For Trade 2 – Bought on Wednesday, but over the weekend, so settle on Monday
For Trade 3 – Bought on Thursday, but over the weekend and also holiday on Tuesday, so settle on Wednesday

Details on T+3 (the day of settlement)

Is there a specific time on T+3 when you need to settle the trade?

Yes. You need to settle your trade on day 3 (T+3):
1) Before 12:30pm in general (that means, before the morning session ends)
2) Before a pre-determined time if you request a further extension from your remisier
--- For example, your remisier may allow you to extend your settlement day to T+4 at 12 noon.
--- The extension limit depends on your remisier (who ultimately bears the responsibility) and you need to request the extension

How do you settle the trade on T+3?
This depends on whether you have a cash account or a margin account.

> Buy stocks, cash account

- You do the trade within your credit limit. At T+3, you will need to settle your payment.

- If you do not pay up after T+3, your remisier will sell your shares, and charge you if you sustain any loss from the sell.
------- When they sell your stocks, they will sell it at whatever price traders queued to buy.
------- For example, if you bought your share at 90 cents and the highest buyer's price is 80 cents, then you stocks would be sold at 80 cents and you would incur a loss of 10 cents per share.

To avoid such a case, you could top up your trading account with cash prior to any trading. The value of your stocks will be deducted from your trading account (but you have to make sure you have sufficient cash in that account). The brokerage could pay you interest on any balance in your trading account.

> Buy stocks, margin account

- To buy shares using the margin facility, you need to have enough collateral in that account before you are allowed to buy the stocks. Your brokerage firm will charge you interest on your "borrowed" money.

> Sell stocks, either accounts

- Don’t forget that after you've bought some shares, you will have 3 days before you need to pay for it if you intend to hold on to the shares. This also applies if you sold some shares. You will only get the money after 3 days.
- This also means that you can't use the money from shares you sold until T+3 as the buyer hasn't paid you yet!!! tongue.gif

Why are investors sometimes afraid of T+3? What happens to the stock market at T+3?

- In certain cases, traders are afraid T+3 as share prices might drop after a recent rally i.e. there might be a "pull-back" in share prices after a recent upward trend
- This usually happens when the stock market suddenly jumped higher or stock prices suddenly shot up higher
- When stock prices go up suddenly, it usually means that many traders were buying that counter, some using their margin facilities
- On T+3, those traders who used the margin facilities might not want to hold on to the shares and they might dump the shares regardless of whether they made or lose money
- The effect of "dumping" by many traders may cause the share price to drop
- That's the reason why you sometimes see traders warning you on T+3 as share prices might drop
- Note that this doesn't always happen

For example, the counter "IOICORP" suddenly jumped up 50 cents on Monday. On T+3, which is on a Thursday, some traders might be afraid of buying IOICORP because of this "T+3" effect where the stock price might drop as people NEED to sell their shares (which they bought on Monday).


References:
http://www.investopedia.com/terms/s/settlement_period.asp
http://www.sec.gov/investor/pubs/tplus3.htm

This post has been edited by kmarc: Jul 16 2009, 09:35 AM
kmarc
post May 23 2009, 09:17 PM

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Part 2 - Dividends & stocks

Content -----------------------------------------------------------

a) What is "Dividend"?
b) Differences between "Dividends" and "Interests"
c) Forms of payment for dividend
--- Cash dividends
--- Stock or scrip dividends
--- Property dividends or dividends in specie
--- Other forms
d) Cum dividend/ex-date/payment date
--- In-dividend date (cum dividend)
--- Ex-dividend date (ex-date)
--- Payment date
e) Types of dividends - Interim, final & special
f) Dividend yield
g) What happens to the stock price when dividend is announced
h) Dividend and taxes
i) How to find out about upcoming dividends?

--------------------------------------------------------------------------

This subtopic will cover the basics of dividends. Look at the quote below on a typical announcement of dividend from a company. The aim of this guide is to enable you to understand the announcement and additionally, on how to get (or avoid) the dividend.

QUOTE
7100 UCHITEC UCHI TECHNOLOGIES BHD

Final Dividend of 6 sen T.E.

Entitlement details: Final Tax Exempt Dividend of 6 sen per share of RM0.20 each for the year ended Dec 31, 2008

Entitlement type : Final dividend
Entitlement Date and time : 30/6/2009 5:00pm
Year Ending/Period Ending/Ended date : 31/12/2008
Ex-date : 26/06/2009
Payment date : 17/07/2009
Stock par value:

A depositor shall qualify for the entitlement in respect of:
- Securities transferred into the Depositor’s securities account before 30/06/2009 4:00pm in respect of ordinary transfers
- Securities bought on KLSE on a cum entitlement basis according to the Rules of KLSE
What is “Dividend”?

Dividends are payments made by a corporation/company to it’s shareholders (i.e. anybody that bought and hold their shares). It comes from a portion of their profits.

When a corporation/company earns a profit, that money can be used to:
1) Re-invest in the companies business (called retained earnings)
2) Paid out as dividends

Most companies retain a portion of their earnings and pay the remainder as a dividend. Obviously, the amount of dividend will vary depending on how much profit the company makes.

Different companies have different dividend policies. For example, companies under REITs (Real-estate investment trust) usually have a policy of giving out 90% of their profits as dividends (Complying with the 90% pay out rule, the REIT company itself is exempted from paying tax!). Other companies might set a different dividend policy e.g. 40% of profits.

Remember that dividends are usually paid when the company make profits. If the company is not making a profit, then no dividends are usually given out.

Differences between “Dividends” and “Interest” (e.g. from FD, fixed deposits)?

For all intents and purposes, both are the same as you’ll get some money from your “Investment”. However, they are actually quite different. Here’s a comparison table between those two:

user posted image

For dividends, it is taxable unless stated as T.E (Tax exempted). For further info, see "Dividend & Taxes"

You will understand more about the difference further in the guide.

Forms of payment for dividend

Note that dividends can be paid not only with cash but with other various forms:
1) Cash dividend
--- In exact amount
--- In percentages
2) Stock or scrip dividends
3) Property dividends or dividends in specie
4) Others

1) Cash dividends

Paid out in the form of cash/cheque
Most common form of payment
May be taxable

There are 2 ways a cash dividend can be declared:
1) Exact amount e.g. 6.5 sen/share
2) In percentage e.g. Final dividend 25%, interim dividend 10%

Exact amount
If you hold 1000 shares and the cash dividend is RM 0.06 per share, you will receive 1000 x 0.06 = RM60 in total

In percentage
When calculating in percentages, you need to multiple the percentage by the total par value of your shares, and NOT the stock price. Note that the par value of a stock does not mean the true value of it. Par value is a fixed number, determined when the stock was issued (and listed on stock certificates), and does not fluctuate even when the price of the stock changes in the stock market.

Say you're holding 1000 shares of the company UCHITEC, which is currently at a price of RM1.20. Even though each share has a value in the stock market, it also has an original price - termed "par value". Say that UCHITEC's shares has a par value of RM 0.20 and it is giving out a final dividend of 25%.

Correct calculation (by using par value)
1000 shares x RM 0.20 x 25% = RM 50

Incorrect calculation (by using stock price)
1000 shares x RM1.20 x 25% = RM 300 blink.gif

How to find out the par value of a stock? Just go to your online trading portal, select a stock and look at it's info. For maybank2u users, you can select the stock, then from the pull-down menu "stocks", select "General info". The par value is listed with many other informations.

Here's an example for the company KINSTEL (my favorite!) with a par value of 0.20 (20 cents)

user posted image

Additional examples
Here are some other examples, prices, dividend and par value are made-up.

SIME (Current price RM7.00)
Dividend : 10 cents
Holdings : 2000 shares

Dividend received would be : 2000 x 10 cents = RM 200

AXIATA (Current price RM2.50)
Dividend : 20 cents
Holdings : 4000 shares

Dividend received would be : 4000 x 20 cents = RM 800

TM (Current price RM 2.80, par value RM 0.50)
Dividend : 10%
Holdings : 7000 shares

Dividend received would be : 7000 x RM 0.50 x 10% = RM350

LIONIND (Current price RM 1.20, par value RM 0.20)
Dividend : 25%
Holdings : 5000 shares

Dividend received would be : 5000 x RM 0.20 x 25% = RM250

In summary, the price of stocks are not relevant when calculating the amount of dividends received.

2) Stock or scrip dividends

Paid out in the form of additional stock shares of the issuing company, or other corporation (e.g. it’s subsidiary corporation).
They are usually issued in proportion to shares owned e.g. 10 extra shares for every 1000 shares owned
One example is the recent OSK dividend, which proposed a dividend of cash and additional shares...... details....

3) Property dividends or dividends in specie (Latin for "in kind")

Paid out in the form of assets from the issuing corporation or other corporation (e.g. it's subsidiary corporation)
Examples.....

4) Other forms

Can be used in structured finance. Financial assets with a known market value can be distributed as dividends
Warrants are sometimes distributed in this way
For large companies with subsidiaries, dividends can take the form of shares in a subsidiary company. A common technique for "spinning off" a company from its parent is to distribute shares in the new company to the old company's shareholders. The new shares can then be traded independently.

Cum dividend/ex-date/payment date

You need to fully understand the terms that are used in order to 'play' the dividend game.

In-dividend date (better known as cum dividend)

Indicated by a "C" beside the name of the listed counter : user posted image

The last day of trading to receive the dividend. It is one trading day before the ex-dividend date, where the stock is said to be "cum dividend" (in other words, the stock that you hold comes with the dividend).
Existing shareholders and anyone who buy and hold the stock on this day (i.e. until the end of that particular trading day e.g. 5:00pm) will receive the dividend. Even if you bought the shares at 4:59pm on the last in-dividend date, you are still entitled as you held the shares until the ex-date.
After this date, the stock becomes ex-dividend

Ex-dividend date (better known as ex-date)

Indicated by an "X" beside the name of the listed counter : user posted image

The date after the dividend is allocated (note the word "allocated" as the dividend is not actually paid to shareholders yet)
Shares bought on this day onwards will no longer come with the dividend
However, shares that you held up to this day can be sold and you will still receive the dividend (as you held the shares past the in-dividend date)

The following illustration will give a better picture:

user posted image


Stock prices on ex-date

The stock price usually decrease on the ex-dividend date by an amount roughly equal to the dividend paid. This reflects the decrease in the company's assets resulting from the declaration of the dividend.
--- For example, when a dividend of $1,000,000 is declared (e.g. 6 sen per share), distributed and paid, the corporation’s cash is reduced by $1,000,000 and its retained earnings (part of stockholders’ equity) is reduced by $1,000,000. Due to the reduction in the corporation's cash/equity, it's stock price is also reduced accordingly (as the company's stock price is a reflection of it's assets (which including it's cash). If the stock price was RM 1.50, it would be RM 1.44 (RM 1.50 - 0.06) after the dividend is allocated.

Dividend : 6 sens
Ex-date : 20/5/2009
In-dividend date share price (19/5/2009): RM 1.50
Ex-dividend date share price (20/5/2009): RM 1.50 - 0.06 = RM 1.44


Payment date

The day when the dividend cheques will actually be mailed to the shareholders of a company or credited to brokerage accounts


Let's stop and review what we have learned. Let's take a look at UCHITEC's announcement as below:

QUOTE
Entitlement Date and time : 30/6/2009 5:00pm
Year Ending/Period Ending/Ended date : 31/12/2008
Ex-date : 26/06/2009
Payment date : 17/07/2009


From this announcement, you'll understand that you can get the dividend by just buying the stock before 5pm on 25/6/2009 and hold it until the next. day. Once the stock goes ex-date, i.e. 26/6/2009, you can sell the stock and still get the dividend.

Types of dividends - Interim, final, special

Interim dividend

Distribution of profits (i.e in the form of dividends) to shareholders before a company's annual earnings have been determined, or at any time between 2 successive AGMs (annual general meetings)
Companies that pay interim dividend try to be reasonably certain that they can afford to pay the dividend (as their financial position is not yet fully known), and reserve the necessary adjustments in the subsequent or year-end dividend payments based on their final financial statement.
Often distributed quarterly or half-yearly
Generally does not need the approval of the AGM
Usually accompanied by the company's interim financial statement

Final dividend

Declared at the end of the financial period when the company's profits and financial health is known
Declared at a company's AGM for any given year
Usually declared before the books are closed and will be paid the following year
Compared to interim dividends, the final dividend usually constitute the largest payout for that particular year

Special dividend

Also referred to as "extra dividend"

A one-off (non-recurring) distribution of company assets (usually in the form of cash), to shareholders.
Generally declared after exceptionally strong company earnings results as a way to distribute the profits directly to shareholders.
Can also occur when a company wishes to make changes to its financial structure or to spin off a subsidiary company to its shareholders.
Usually larger in amount as compared to normal dividends paid out by the company.



Dividend yield (DY)


One way to determine if a stock is worth the investment is to calculate the DY. This is especially useful if you're planning to buy dividend stocks. DY is the ratio that indicates the return on an investment or the amount a company pays stockholders each year in relation to its share price.

Dividend per share / Market price per share

Calculation: Gross dividend per share / market price per share x 100%

Examples :
Total annual dividend given : RM 1.20
Current stock price : RM 15.00

Dividend yield = (RM1.20 / RM 15.00) x 100% = 8%

So, the dividend yield for that particular share/counter is 8%

What happens to the stock price when dividend is announced
When dividend is declared/announced, the stock price for that particular company will appreciate or rise abruptly, especially if the dividend declared is attractive.
From the time of announcement till the time of ex-date, the share price might still go up although at a slower pace
Once ex-date, the share price might gradually fall as investors might sell off the stock as they have already gained from the capital appreciation and the dividend

This does not occur all the time but is probably true for many stocks

So, how might you capitalize or benefit from this "dividend play"?

1) Hold the stock prior to the announcement of the dividend
- some investors buy up the stocks before an anticipated dividend announcement to try to benefit from the possible dividend announcement
- However, the stock price may fall instead if no dividend was declared or the dividend given was a disappointment

2) Buy the stocks once the dividend is declared
- If you buy it early enough, you might still gain from the possible abrupt rise in the stock price

3) If you missed the announcement, you can still buy before the ex-date
- Buying before the ex-date may also prove beneficial as stock prices may still rise as investors wants to have a piece of the dividend
- You probably won't benefit much if you buy near the ex-date

4) Hold the stocks until ex-date so that you receive the dividend (@ hold long-term)
- Remember that you do not have real profit when you get the dividend because the stock price will be reduced accordingly
- You will only gain from the dividend IF the corrected stock price starts to rise to previous pre-dividend stock price
- Just remember that price reduction on ex-date is usually not a problem as good stocks have a tendency to go back to it's original price based on what investor thinks the company is worth.

Dividend and taxes

Please refer to "Part 4 - Taxes and stocks/dividends"


How to find out about upcoming dividends?

There's a few ways you can do that:
1) Companies website
2) Announcement in your trading portal
3) Bursa Malaysia's website - http://www.bursamalaysia.com/website/bm/index.jsp

For Bursa Malaysia's website, just select Listed companies > Entitlements by ex-dates. Download the PDF file and you'll have a summary of upcoming dividends.

user posted image

References :

http://en.wikipedia.org/wiki/Dividend
http://articles.moneycentral.msn.com/Inves...ighReturns.aspx
http://www.investopedia.com/

This post has been edited by kmarc: Jul 16 2009, 12:04 PM
kmarc
post May 23 2009, 09:18 PM

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Commisions & brokerage fees

Content --------------------------------------

a) Brokerage fee
b) Contract stamp
c) Clearing fee

--------------------------------------

When you do stock trading, either buying or selling shares, you will be subjected to various commissions and fees which includes:

1) Brokerage fee - which depends on a few factors:
--- a) The rates of the bank or brokerage house
--- b) Intraday trading or not (any term for non-intraday trading????)
--- c) Special fee for special customers (???? I think there is such a thing hmm.gif )
2) Contract stamp
3) Clearing fees

Brokerage fee

Different banks or brokerage house will have different rates. It could be:
Bank A - 0.42% or minimum RM12
Bank B - 0.2% or minimum RM8
Bank C - 0.1% or minimum RM8

The rates can change so it is important that you find out the rates from your remisier.

For intraday trading (that means you bought and sold your shares on the same day), you generally get better rates. For example, Maybank charges:
- 0.42% or minimum RM12 for each transaction
- 0.15% or minimum RM8 for intraday transaction (regardless of how many times you bought and sold a particular counter in the same day)

? Special fee

Contract stamp
The amount depends on the total value of shares in each transaction.
<1k - RM1
<2k - RM2
<3k - RM3
<4k - RM4

For example, if you bought 8,000 shares of KINSTEL for RM6,785, the contract stamp fee would be RM7 (because it is <7k)

Clearing fee
Is 0.03% of the total value of shares in each transaction.

For example, if you bought 8,000 shares of KINSTEL for RM6,785, the clearing fee would be:
RM6,785 x 0.03% = RM 2.04

Multiple trades in a day
If you made multiple buys or sells on a particular counter on the same day, you are only charged once for all buy transaction and all sell transaction.

For example, on a particular day, you bought the counter KLK multiple times:
9:45am - Bought KLK 2000 shares
10:30am - Bought KLK 3000 shares
2:30pm - Bought KLK 1 share (partial match because some culprit sold 1 share to you!!! sweat.gif)
3:00pm - Bought KLK 999 shares (to even out the 1 stupid share)

Note that you are not charged for each transaction. At the end of the day, you are charged as follows:

Total shares : 2000 + 3000 + 1 + 999 = 6000 shares bought and the fees are charged only once based on this amount.



Example 1

user posted image


Example 2

user posted image


Example 3

user posted image

This bank has a brokerage fee of 0.42% or minimum RM12.
Note that the brokerage fee, if according to calculation, should be RM1970 x 0.42% = RM8.27
Since the minimum is RM12, the brokerage fee is calculated as minimum RM12 and not RM8.27

Example 4

user posted image

I hope I got the calculations correct. Kindly inform me if there are any accounting fraud.... whistling.gif

This post has been edited by kmarc: Aug 9 2009, 11:06 PM
kmarc
post May 23 2009, 09:18 PM

The future is here - Cryptocurrencies!
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Part 4 - Taxes and stocks/dividends

Content ----------------------------------------------------

a) Taxes and stocks
b) Taxes and dividends
c) REITS and dividends

-----------------------------------------------------------

Taxes and stocks

Great to know that all profits from stock trading is not taxable! rclxms.gif

This means that if you earn RM50,000,000,000 from buying shares due to capital appreciation, you walk away with that much amount. No tax! thumbup.gif

Note : Errrmmmm.... please correct me if I'm wrong.... blush.gif


Taxes and dividends

Basically, any income, whether it is an individual or a company, will be taxed. Previously, profits from companies were taxed using the "Two-tier Imputation system (TTS)". However, since 2008, a new tax system has been implemented, which is called the "Single-tier tax system (STS)". A transition period of 6 years has been provided for implementation of the STS and all companies will move to the single-tier tax system on 1 Jan 2014.

The major difference between these two systems is as follows. For the old TTS, company's profits are taxed twice, one at the company level and once on shareholders who received the dividends. For the new STS, tax on company's profits is a final tax and dividends that are distributed to shareholders are no longer taxable. In other words, under the new STS, the dividends that you receive are not taxable and you do not have to calculate the dividends in you annual income tax assessment.

Note : I'm not going to attempt to explain much about the tax system as it is a whole topic by itself. Will only stress on important practical points. To understand more, please google up on "Two-tier Imputation System (TTS)" and "Single-tier tax system (STS)".

Very good article on single-tier tax system : http://www.micpa.com.my/micpastudent/docum...e1-10112008.pdf


As the period between 2008 and 2014 is the transitional period, some dividends will still be declared under the old system and some under the new one as depicted by the table below:

user posted image


From the table, let's extract some examples:

BKAWAN - Interim dividend 10 sen Single Tier T.E.
KLK - Interim dividend 10 sen Single Tier
ALLIANZ - 1st and final dividend 2 sen


Explanation:

BKAWAN - since it is single tier, shareholders who receive the dividend does not have to declare the dividend in their income tax filing.
KLK - same scenario as BKAWAN. Just that KLK should be more specific and state the dividend as " Interim dividend 10 sen Single Tier T.E."
ALLIANZ - as it is not declared under the single-tier tax system, the dividend is taxable to shareholders who receive the dividend.

Additional notes on the term "less tax":

The "less tax" refers to the tax on the company i.e. corporate tax. For 2009, the corporate tax rate is 25%.

There are cases where the dividend is declared in this way:
1) 10 sen dividend less 25% income tax
2) 10% dividend less tax

The calculation for this is easy. You just have to minus 25% from the declared dividend. Say you hold 2000 shares:

1) Dividend declared :

10 sen x 2000 shares = RM200

RM200 x (100%-25%) = RM150

2) Dividend declared :

10% dividend less 25% tax

Par value : 20 cents

10% x 20 cents x 2000 shares = RM40.00

RM40 x (100%-25%) = RM30

REITS and dividends

Before we go further, we need to understand what is REITS first. Let's go to the basics.

REIT

Real estate investment trust (REIT) - companies that buy properties to rent out. Profit from rental. Profits are "distributed" to investors (Just like you renting out your house and collecting rents from the tenants)

Distribution of profits can be quarterly, semi-annually or annually.

DPU

In stocks, dividend (per unit) is the normal term used for the distribution of profits by a company. However, in REITS, the correct term is "Distribution per unit" or DPU. Strictly speaking, DPU are not dividend per se.

If you receive DPUs from REITS, it is usually taxable unless the announcement included the "T.E" at the back (T.E = tax exempted). For example, HEKTAR gave a DPU of 5 cents T.E.

If it is taxable to the investor, the tax is only 10% (termed "withholding tax") and not the normal 25% tax for stock dividends.

For the company who manage the REITS, they are not taxable so long as they distribute at least 90% of profits to investors.

____________________________

Example 1

Hold Axreit shares which is giving a dividend of 2.82 cents:
- 10,000 units
- Dividend per unit : RM 0.0282

Gross DPU received : 10,000 x RM0.0282 = RM282
- Minus 10% witholding tax = RM282 - (RM282 x 10%) = RM282 - RM28.2 = RM253.80

Nett DPU received = RM253.80


Example 2

You hold 13,000 units Qcapita which declares:
- 3.84 sen per unit - Taxable
- 0.06 sen per unit - Tax exempted

Taxable income = 13,000 x 3.84 sen = RM499.20 (that means you will be taxed on this RM499.20 "profit")
10% withholding tax = RM499.20 x 10% = RM49.92 (the amount paid to tax)

Non-taxable income = 13,000 x 0.06 sen = RM7.80 (no tax for this "profit")

So, the "Net payable", which means the amount you actually received is:

RM 499.20 + 7.80 sen - RM49.92 = RM457.08

Remember that:
- the 10% withholding tax cannot be claimed back
- the REIT company is not taxed as long as they distribute at least 90% of their profits

____________________________

Annual income tax assessment

In general, when you do your income tax assessment, you don't have to declare the dividend you get from REITs (as long as they distribut at least 90% of their profits). However, you have to keep the tax vouchers just in case LHDN (Lembaga Hasil Dalam Negeri @ Inland Revenue Board) audits you.


Reference : http://thestar.com.my/news/story.asp?file=...&sec=budget2009

This post has been edited by kmarc: Apr 12 2010, 06:55 AM
kmarc
post May 23 2009, 09:19 PM

The future is here - Cryptocurrencies!
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Warrants - The confusion, the headaches and the frustration

Content ----------------------------------------------------------------

a) The basics of warrants
b) What is warrants?
c) What happens when warrants are issued?
d) Why are warrants issued?
e) Why buy warrants if common stocks can also increase in price?
f) What happens to warrants later on until expiry?
g) How and when to trade warrants?

-----------------------------------------------------------------------------

If you're lazy to read further and wants to know immediately what a warrant is, just think of warrant as a tool, a small knife to cut big tree (as we LYN people like to say). biggrin.gif Warrant is a high risk but high return investment where you can use relatively less money to get huge gains. Just don't forget that if you cut the big tree the wrong way, you can get flatten when the tree falls on you!!! Just like what can happen to the warrant price on expiry.... fall flat to a price of ZERO!

In summary, warrants means getting the maximum return with the least amount of your capital at risk

Disclaimer : I do not pretend I know about warrants. In fact, before this project, I knew NOTHING about warrants. Whatever facts below are taken from the internet with the references at the end. I just try to organize, summarize and make it as simple to understand as possible. The information is provided free without any charge. If not, I might get sued for copyright infringement/violation, plagiarism and what not! sweat.gif Also, no warrant was sold or exercised during the production of this subtopic. nod.gif

Update : There's an excellent website regarding warrants that recently came out, much better than my guide!!! http://www.nagawarrants.com/home.html

The basics of warrants

In order to understand warrants, we need to go back to the very basics of basics. The explanation will be thorough so that you don't miss any step.

Before reading on, here are the important terms that you need to understand when you deal with warrants:

Common stock
- The normal stocks that is traded in the stock market e.g. PBBANK, MAYBANK, SIME, TM, YTLPOWER, GAMUDA, KINSTEL, etc.
- In relation to warrants, the common stock is also referred to as the "mother share" OR "underlying security"

Exercise a warrant
- you exercise your right to convert the warrant to common stock

Issue price
- the price of the warrant when issued

Exercise or strike price
- the pre-specified price at which the holder of such warrants may exercise the warrant

Expiry date
- the date in which the ability to exercise that right expires.
- All warrants have expiry date
- The expiry date is usually a minimum of 2 - 5 years from the date of issue
- After the expiry date, warrants are worth nothing. Zero.

Leverage -

Intrinsic value of warrant
- the difference between the share price and the warrant's exercise price. If the share price is less than the exercise price then the intrinsic value is zero.

Premium
- The premium is anything paid above the intrinsic value for the warrant. Typically the premium will decrease as the price of the warrant rises and the time to expiration decreases.
The lower the premium, the more attractive the warrant

@ The amount of share price increase required to equal the combined price of warrant and exercise.

Example
Current YTLPOWER common stock price : RM 2.17
Current YTPOWER-WB price : RM1.10
Exercise price : RM1.25
Exercise ratio : 1

Warrant intrinsic value = Stock price - exercise price = RM 2.17 - RM1.25 = RM0.92
Premium = Current price of warrant - intrinsic value = RM1.10 - RM0.92 = RM0.18

Premium in % = Premium / stock market price x 100% = 8.29%

To understand premium better, it just means how much more you are paying to buy the warrant and then immediately convert it to common stock.
Buy YTLPOWER-WB : RM1.10
Exercise your right and convert the warrant to common stock : YTLPOWER-WB + exercise price = RM 1.10 + RM 1.25 = RM 2.35
YTLPOWER price : RM 2.17

So, you're paying RM2.35 rather than RM2.17 to get the common stock. The extra amount you paid is (2.35-2.17) / 2.17 x 100% = 8.29%

Before you crack your head calculating the premium, you can:

1) Use a warrant calculator : http://www.bursawave.com/warrant-calculator/

2) Use the premium formula

Important : The above calculation assumed that the exercise ratio is 1. For every warrant, there is a specific exercise ratio, which needs to be factored in. Example as below.

user posted image


Exercise ratio
- Number of warrants in exchange for one (1) mother share
@ Indicates the number of X warrant related to one share and specifies the amount of the underlying that the owner of a single warrant is entitled to buy or sell.

Each warrant has an exercise ratio. The most common ratio is 1.0. However, there are other ratios that can be any number, but usually below 1.0 e.g. 0.5, 0.25, 0.02, 0.000067, etc.

E.g.
Conversion ratio of 0.5 - each warrant confers the right to buy 0.5 shares or 2 warrants to buy 1 share
Conversion ratio of 0.5567 - 1.7963 warrants to buy 1 share

Example 1
TM-CI warrant price : RM 0.11
TM (mother share) price : RM3.80
Exercise ratio : 0.17 (6 warrants to 1 mother share OR 1 warrant to buy 0.17 mother share)
Exercise price : RM 3.62

If you exercise the warrant immediately, you will pay a high premium.
Warrant price for 1 mother share = RM 0.11 x 6 = RM 0.66
Convert to mother share = RM 0.66 + RM 3.62 = RM 4.28

TM's price is only RM3.80 while you paid RM4.28 when you exercise the warrant to become the mother share. To break even, you need the mother share to be RM4.28 before you exercise the warrant.

Example 2
Tenaga-CL warrant price : RM 0.13
Tenaga (mother share) price : RM 6.30
Exercise ratio : 0.07 (15 warrants per 1 Tenaga shares OR 1 warrant to buy 0.07 mother share)
Exercise price : RM 6.00

If you exercise the warrant immediately, you will pay:
Warrant price for 1 mother share = RM 0.13 x 15 = RM 1.95
Convert to mother share = RM 1.95 + RM 6.00 = RM 7.95

Tenaga's price is only RM6.30 while you paid RM 7.95 when you exercise the warrant to become the mother share. To break even, you need the mother share to be RM 7.95 before you exercise the warrant.

When using the premium formula, the correct formula should be:

user posted image

As for Tenaga-CL, the warrant has an exercise ratio of 15 warrants per Tenaga share, and an
exercise price of RM6. With the warrants closing at 11 sen last Friday, the break even price for
the mother share, after considering the warrants’ exercise ratio and price, comes up to RM7.65.
Calculations reveal that Tenaga-CL was last traded at a 21.4% premium to the mother share
price of RM6.30 on March 20.


What are warrants?
Warrants are certificates or financial instrument that entitle the holder (the investor who bought the warrant) the right, but not the obligation, to buy a specific amount of common stock at a fixed price in the future.

Example
Company's common stock : YTLPOWER
Company's warrant : YTLPOWER-WB (Warrant B)

If you hold some YTLPOWER-WB, you have the right to buy YTLPOWER common stocks at an agreed-upon price in the future

Warrants are usually denoted by additional wordings at the back:
YTLPOWER-WB
TGOFF-WA
TGOFF-WB
OSK-WB

Types of warrants

Warrants can be divided into many categories:
1) Company warrants or Covered (Structured) warrants
2) Call warrant or Put warrant
3) American or European warrant


Company or covered warrants

The typical differences between company warrant and a covered (structured) warrants are as below:

user posted image

QUOTE
Additional info
Company warrants normally have a lower liquidity, and there is no way to compare their prices. This is because the price of a company warrant is mainly determined by the board of directors. Therefore, the warrant price is very likely to deviate from the underlying price. Put another way, company warrants are less transparent and, sometimes, more speculative. In contrast, covered warrants have a good liquidity due to the market making system. Besides, their pricing mechanism is more transparent (statistics such as effective gearing is readily available). Hence, it is possible to track changes in the theoretical prices of covered warrants.

Although the concepts behind company warrants and covered warrants are similar, the two are subject to different levels of risks. Investors should study the relevant information carefully and bear in mind their own risk tolerance in making the decision whether to invest in company warrants or covered warrants.
Source : http://neaven-seo.blogspot.com/2008/01/dif...f-warrants.html
For more regarding Covered (structured) warrants, take a look at OSK's Issued Structured Warrants : http://www.osk188.com/pageW.jsp?name=SW_OSKIssued

Call or put warrant

Call warrant - gives the holder the option to buy
Put warrant - gives the option to sell

Investors buy call warrants when they expect the underlying share prices to increase in the future. On the other hand, investors buy put warrants when they expect the underlying share prices to drop in the future.

Previously, in Malaysia, only "Call Warrants" were allowed to be traded. "Put Warrants" were not allowed, just like short selling. However, KLSE recently has allow for "Put warrants" to be traded.

American or European warrant

Warrants or call warrants can also be subdivided into two categories based on their exercise style - either American or European.

An American warrant - can be exercised at any time up to its maturity date
European warrant - can only be exercised at its maturity date.


What happens when warrants are issued?

Warrants are usually issued by the company itself and sometimes by 3rd party issuers. After they are issued, warrants trade similarly to stocks. However, warrants aren't usually as liquid to trade as the stock itself.

When warrants are issued, there are a lot of information released, which includes these very important info:
1) Issue price
2) Exercise/strike price
3) Premium
4) Expiry date

Example
YTLPOWER common stock price at the time of warrant issue : RM 1.10

YTLPOWER-WB was then issued with the following details
1) Issue price : RM 0.10
2) Exercise price: RM 1.25
3) Premium : 22.7% -------- calculated by [(RM1.25 + RM0.10) - RM1.10] / 1.10 x 100%
4) Expiry date : 11/06/2018


From the above example, when YTLPOWER-WB is issue, you can buy it at RM0.10 per unit. However, remember that warrants are traded similar to stocks. As such, its price can go up on down with time.

If you bought 1000 units and were to immediately exercise the warrant to convert it to become common stocks, you will have to pay a premium of 22.7%, which is definitely not a good idea right?

Which leads us to the next question.


Why are warrants issued?

Warrants are usually issued along a new bond or stock offering to increase the attractiveness of the offering. Warrants also help reduce the financing cost. Bundled bonds and warrants or bundled stock and warrants are call units.

They are "sweeteners" because they're something that the issuer throws into the new offering to make the deal more appealing; however, warrants can also be sold separately on the market. Also frequently referred to as an "equity kicker", i.e. an additional incentive for the buyer of the common stock to invest in the company.

When warrants are originally issued, the warrant's exercise price is set well above the underlying stock's market price. In the above case, YTLPOWER's exercise price was RM1.25 while the underlying stock price (YTLPOWER) was only RM1.10.

Now, why would investors buy an instrument whose price is above the current price of shares of stock that effectively underlie the instrument? Investors who buy a warrant basically believe that the price of the stocks of the company will rise above the warrant price at that specified point in time in the future. If this happens, the warrant-holder then can exercise his/her claim as specified in the warrant.

For any given warrant, the higher the premium, the more expensive the warrant becomes. If an investor pays a premium to buy a warrant, the underlying share must rise by a percentage equal to the premium before the maturity date to break even.

As such, warrants are, in actual fact, a long-term call on the potential price increase of the common stock. You will lose money if you exercise the warrants immediately after you bought them.

Warrant holders have no voting rights and receive no dividends.

Which leads us to the next question.


Why buy warrants if common stocks can also increase in price?

2 main reasons:
1) Cheaper
2) Leverage

Cheaper
Warrants are cheaper as compared to the price of the mothershare

Say you have 10k and consider buying the shares of the company PBBANK. It also has a warrant PBBANK-CH.

PBBANK : RM9.90
PBBANK-CH : RM0.03

With 10k, you could only buy around 1000 shares of PBBANK (RM9.90 x 1000 = RM 9,900) but can buy around 330,000 warrants of PBBANK-CH! (RM0.03 x 330,000 = RM9,900)

Alternatively, you could also buy 1,000 warrants of PBBANK-CH for RM0.03 x 1,000 = RM30 (which leaves you RM9,970 to buy other shares)

Important : It is not as simple as that when making decisions to buy warrants as you have to take into consideration the exercise price and conversion ratio. The above example is to depict the meaning of "cheap" in warrants.

Leverage

Warrants are all about leverage. Leverage measures how much more a warrant will move in percentage against its underlying stock. When you invest in a warrant, you stand to gain from the exposure of the share price movement at only a fraction of its cost. In terms of percentage, a warrant is more sensitive to the market movement compared to its underlying assets. Therefore, by investing in a warrant, it allows you to benefit from unlimited upside at a lower cost. Apart from that, you can free up your capital to invest in other investments. The downside risk of not being able to exercise the warrant is only the loss of the warrant premium.

Leverage is why an investor should be interested in warrants. Warrants provide the investor the potential for incredible upside leverage versus the underlying common stock. As the price of the underlying common stock rises (i.e. in a bull market), the warrant will (in most cases) greatly outperform the common stock.

In many cases, the warrants will reflect the potential of a 2:1 leverage over the common stock, meaning simply, if the common stock increases 100%, the warrant will increase by 200%, thus a leverage of 2:1.

In short, leverage means getting the maximum return with the least amount of your capital at risk.

It is important to note that leverage diminishes as the common stock rises father above the warrant's exercise price. At some high price for the common, the warrant will lose most of its leverage and advance at a rate barely higher than the common.

Example
You have these shares/warrants in hand:

PBBANK = 1,000 shares at RM9.90
PBBANK-CH = 1,000 shares at RM0.03

The price of PBBANK increases by RM2.00 and PBBANK-CH also increases by RM0.03 as it follows the mother share.

PBBANK RM9.90 increase RM2.00 = RM11.90 (increase by around 20%)
PBBANK-CH RM0.03 increase RM0.03 = RM0.06 (increase by around 100%!!!)

From the example, you can see that even though PBBANK-CH only increase by 3 cents, it is 100% gain from it's original price. As compared to PBBANK which increase RM2 but only gain 20% from it's original price.

Now, imagine if you had 33,000 shares of PBBANK-CH!!! drool.gif



What happens to warrants later on until expiry?

In progress

Remember that warrants have an expiry date.

Warrant prices usually start to decline when the expiry date is near.

If the underlying stock is trading below the exercise price on the expiration date, the warrant will be worthless which is why it is recommended that investors focus on warrants that have a remainnig life of at least 2 years.

______

Of course, if the stock price in the future does not go higher than the warrant's price, the right of claim provided by the warrant is not exercised by the investor and is left to expire. In this case, the investor loses by the amount it cost to buy the warrant. The company issuing stock rights or warrants is really not directly affected by the profits or losses made by investors. As far as they are concerned, these instruments provide a means to raise funds for the use of the company. The profits and losses that accrue to the investor refer to investment gains and losses of theinvestor in managing the instruments and do not reflect gains and losses of the company itself.
____

The value of a warrant is determined by two main factors, its intrinsic value and time value. Its intrinsic value is the difference between the current price of the underlying asset and the warrant's exercise price.

A warrant has a limited life span and as such, when you are looking at the time value, as time passes the value will decrease accordingly until it turns zero on expiration. The factors that will positively affect a warrant's time value are the expected volatility of the underlying stock and the warrant's time to maturity.

Where to get information on warrants?

There are various sources where you can find further details about a particular warrant:
1) Bursa Malaysia website
2) Your own trading portal
3) The Edge weekly magazine
4) Your local newspaper (stock section)

Bursa Malaysia website
For bursa Malaysia, you need to go to the website : http://www.bursamalaysia.com/website/bm/index.jsp

From the top menu, select "Market information" > "Market statistics" > "Warrants"

From there, you can either select "Top 20 active warrants", "Call warrants" or "Summary or warrants". After that, download the PDF file.

user posted image

Your own trading portal
For example, if you use Maybank2u, go to the trading portal. Select the drop-down menu >"Search by sector" > "Warrants" > "All sectors".

user posted image


The Edge (Weekly) Magazine

The Edge Magazine will list out ALL the warrants on KLSE with lots of information in every weekly issue. Here's an example :

Attached Image



References:

http://books.google.com.my/books?id=Zf_uMf...result&resnum=4
http://www.safehaven.com/article-4613.htm
http://books.google.com.my/books?id=wLE4vo...esult&resnum=10
http://www.hotstockmarket.com/forums/showthread.php?t=44281
http://www.preciousmetalswarrants.com/whywarrants.html
http://business.inquirer.net/money/advice/...stock_rights%3F
http://www.hashemian.com/financial-markets...arrants-183.htm
http://www.sc.com.my/eng/html/resources/gu...ants_090508.pdf
http://www.numa.com/derivs/ref/calculat/warrant/calc-wtb.htm
http://www.investment-analytics.com/files/...es/Warrants.pdf
http://www.asiaone.com/Business/My%2BMoney...1205-39670.html
https://www.warrants.standardbank.co.za/war...ful_Trading.pdf
http://biz.thestar.com.my/news/story.asp?f...94&sec=business
http://www.investopedia.com/articles/04/021704.asp
http://warrants.cimb.com/WRT/callWarrants.jsp#a7
http://media.dbwarrants.com.hk/EN/binaer_view.asp?BinaerNr=8



QUOTE
Without mentioning any specific names, let’s illustrate why warrants can be very profitable. One large gold company trading on the TSX and the American Exchange has two warrants which trade on the TSX. The most recent warrant issued has an exercise price of C$12.10 and expires on 7-January-2008.

Closing price of the common stock (23-Sep-2005) C$9.30

Closing price of the warrant (23-Sep-2005) C$1.55

Say you were interested in buying 1,000 shares of the common stock which would cost you C$9,300. You could instead purchase 1,000 warrants at C$1.55 for a total cost of C$1,550.

Cost of the common stock (1,000 shares) C$9,300

Cost of the warrants (1,000) (C$1,550)

Your savings C$7,750

Now you control 1,000 shares and have saved a lot of money.

Not only do you save money, if the common stock goes to say C$20 (a return of 115%), the warrant will be worth at least C$7.90 or a total of C$7,900 on your investment of C$1,550, reflecting an incredible return of 410%.

What if, instead of buying 1,000 shares of the common stock you invested the entire amount in the warrants, you could actually purchase 6,000 warrants for the same total cost of C$9,300. Again, if we get a move in the common stock to C$20 (a 115% return), the warrants will be worth at least C$7.90 or a total of C$47,400 (6,000 wts @ C$7.90), for a return of 410%.


This post has been edited by kmarc: Feb 9 2010, 05:13 PM
kmarc
post May 23 2009, 09:19 PM

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How and when to trade warrants?

2nd part of warrants, had to split up the post as the previous post was getting too crowded!

QUOTE
You may have been told that investing in warrants is risky; that they are more volatile compared to stocks. However, if you spend some time to learn about them, you will discover that warrants are in fact a good alternative investment vehicle for you to consider. You can make it a part of your investment portfolio and allow yourself room for diversity if you understand it well enough.

Source : http://www.btimes.com.my/Current_News/BTIM...icle/index_html

Here are some tips that I pulled out from the net.

1) Investors should never invest all their investment capital in warrants. Some experts advise not more than 10% of their total investment capital due to the high-risk and high-return nature of warrants

2) As investors in warrants, the objective is to only trade the warrants with no intention of ever exercising them. Remember that warrants are traded freely in the stock market, just like common stocks.

3) If your favorite stock has a warrant trading you should take a serious look to see if they fit your investment criteria (duration of warrant and it's leverage)

4) If you want to invest in warrants, you should first understand how the product works and the risks associated with them. The performance of a warrant is closely linked to the price movement of its underlying assets. As such, if you are expecting an uptrend market and have strong confidence in the underlying shares, then the chances of you reaping rewards from investing in warrants is very high.
However, if the market is experiencing a downward trend and the time to maturity of your warrants is limited, then you should be more cautious in buying them. This is particularly crucial if the current market price of the underlying share is lower than the exercise price of the warrant.

5) Consider buying warrants when they trade below their normal-value price curve and a leverage factor of 2.0 or higher

6) Investors should be disciplined about taking profits and cutting losses. They should monitor their positions closely as warrants tend to move in greater percentage terms than shares.

7) Since warrants can be expected to decline faster than their underlying stocks over the near term, and since long-term they are wasting assets (assets whose value inevitably decreases with time + you don't get dividend), consider them for purchase only when they offer substantial leverage.

8) Read more. Ask experts. Discuss in forums..... It is not always easy to find all the facts on the warrants for some companies and you should always do your homework.

9) A more disciplined way of investing in warrants is to set a time limit for the underlying share to reach your targeted price. If the price does not measure up to your expectations by then, you will need to re-evaluate your position according to your risk/return profile.

10) In instances where the stock market has been bearish and you have no idea whether the market trend is going to reverse anytime soon, then, you may want to go for warrants with a longer time to maturity. A warrant based on an underlying stock that is in good financial health with good business prospect and has at least 3 years to maturity can be an option for you.

If you buy warrants just to get quick money without doing any research, homework or plan, remember that you can lose your money just as quick!

References: All cited in the previous post

This post has been edited by kmarc: Aug 9 2009, 10:49 PM
kmarc
post May 23 2009, 09:20 PM

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Rights Issue

Companies and corporations might, on occasion, need more money to expand their businesses. There are many ways in which to raise cash/capital:

1) Rights issue
2) Bonds issue
3) Issue new "Preferred" stocks
4) Sell common stocks
5) Borrowings
6) Using profits

This subtopic will be dealing mainly on "Rights issue" but for completeness sake, a simple explanation will be given for each of the above in the following spoiler.

» Click to show Spoiler - click again to hide... «


Rights issue

A rights issue is one of the way a company can raise money by selling new shares. It is exclusively only for existing shareholders. These shares are usually offered at a discount compared to the market price of the stock.

Some would say that rights issue is an invitation by a company to its existing shareholders to buy additional new shares in the company. Others think of it as a polite way for a company to get cash from you!!!

When you are offered rights issue, you have 3 options:
1) Buy the new shares (rights issue) - Take up your "rights" to buy the new shares
2) Do not take up the offer (also known as allow the rights to lapse)
3) Sell your rights to other investors

We will go into each of the above options later but explanation of some terms is necessary to understand each of the options.

Basics
Let's take a look at this example of Maybank offering rights issue to it's shareholders:
-Maybank current stock price RM 4.82
-Rights issue RM 2.74

This is good, isn't it? Being offered new shares at a lower price of RM 2.74 while the actual stock price is RM4.82? Well, in actual fact, it is not as good or as simple as you think.

To understand how rights issue work, you need to know the following terms. The Maybank's rights issue is taken as an example:

Initial proposal by Maybank:
QUOTE
Proposed renounceable rights issue on the basis of nine (9) ordinary shares of RM1.00 each in Maybank shares ("Rights shares") for every twenty (20) existing ordinary shares of RM1.00 shares each held in Maybank ("Shares")


After confirmation:
QUOTE
Renounceable rights issue of 2,196,516,217 new ordinary shares of RM1.00 each in Maybank ("Rights shares") at an issue price of RM2.74 per rights share, payable in full upon acceptance, on the basis of nine (9) rights shares for every twenty (20) existing ordinary shares of RM1.00 each in Maybank held at 5:00pm on 2 April 2009 ("Rights issue")

Note : The RM1.00 is the par value of Maybank shares. See above for the explanation of "par value".

Rights shares
The new shares offered in the rights issue

Renounceable rights
This means that existing shareholders can trade their rights (renounce their rights to buy the shares) by selling the rights issue to other investors in the open market (i.e. the shares are transferable). After the rights are traded, they are known as "nil-paid rights".

Note : Nil-paid rights are rights which an investor is holding but have not pay up yet to exercise the rights and receive the shares.

If the rights issue was "Non-renounceable" and existing shareholders take up the rights, they would have to keep the rights and would not be able to sell the rights in the open market (to make a profit)


Rights Issue Entitlement

How much of the rights issue you are entitled to buy/subscribe.
Usually quoted as how many new rights issue you get to buy for every existing share held.

For example, Maybank's rights issue was 9-for-20. That means 9 rights share for every 20 shares held.
If you have:
- 20 Maybank shares - you get to buy 9 rights share
- 100 Maybank shares - you get to buy 45 rights share
- 1000 Maybank shares - you get to buy 450 rights share

Example 2
RENOUNCEABLE RIGHTS ISSUE OF 4,691,752,475 NEW ORDINARY SHARES OF RM1.00 EACH IN AXIATA (“AXIATA SHARES”) (“RIGHTS SHARES”), ON THE BASIS OF 5 RIGHTS SHARES FOR EVERY 4 EXISTING AXIATA SHARES HELD BY AXIATA’S ENTITLED SHAREHOLDERS AS AT 5.00 P.M. ON 10 APRIL 2009, AT AN ISSUE PRICE OF RM1.12 PER RIGHTS SHARE (“RIGHTS ISSUE”)

Axiata's rights issue was 5-for-4. That means 5 rights issue for every 4 shares held.
If you have:
4 Axiata shares - you get to buy 5 rights share
1000 Axiata shares - you get to buy 1250 rights shares
5000 Axiata shares - you get to buy 6250 rights shares

Ex-right date & price
The ex-right date is similar to ex-date for stocks (see above on ex-date).

Before the ex-right date, if you buy and hold any of the company's share until that date, you are entitled to the rights. If you buy the company's shares on the ex-right date, you are not entitled to the rights.

From the example above, Maybank's ex-right date would be 3 April 2009.
Any Maybank shares that you buy before the 3 April will entitled you to the rights.
You can buy at 4:59pm on 2nd April 2009 (and hold it) and still be entitled to the rights.
However, if you bought it at 9:00am on 3 April 2009, you have lost the opportunity to buy the rights.

Changes in share price as a result of rights issue
As mentioned above, existing shareholders have the "privilege" rights to buy the rights issue. However, theoretically, there is no additional benefit/profit/privilege from buying the rights issue as a lower subscription price as the stock price will decline when the shares goes ex-right.


Theorectical ex-right price

Choices available to you as a shareholder
As stated above, these are the options available:
1) Buy the new shares (rights issue) - Take up your "rights" to buy the new shares
2) Do not take up the offer (also known as allow the rights to lapse)
3) Sell your rights to other investors


References:
http://www.takeovers.gov.au/content/Displa...m&pageID=&Year=
http://www.investopedia.com/articles/stock...partner=answers
http://www.stock-investment-made-easy.com/rights-issue.html

This post has been edited by kmarc: Jan 8 2010, 02:18 PM
kmarc
post May 23 2009, 09:20 PM

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Reserved for future use

Possible future guide
Bonus issue
http://www.rediff.com/getahead/2005/may/19shares.htm

This post has been edited by kmarc: Jan 8 2010, 10:18 AM
kmarc
post May 23 2009, 09:20 PM

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Reserved

This post has been edited by kmarc: Feb 9 2010, 05:14 PM
kmarc
post May 24 2009, 07:16 AM

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I have posted the "Dividends & stocks" subtopic in post #3. Still lots of things to add in.

If you guys could help me out on the information available, that would be great. Especially the comparison table on dividend vs. interest. Any suggestions would be helpful too. Thx. smile.gif

Note : Once all the subtopics are completed, I wonder whether I should transfer everything to a new thread or is it possible for Cherroy to delete our discussions and clean the thread? hmm.gif

This post has been edited by kmarc: May 24 2009, 07:21 AM
SKY 1809
post May 24 2009, 07:43 AM

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"companies under REITs (Real-estate investment trust) usually have a policy of giving out 90% of their profits as dividends."

Complying with the 90% pay out rule, the reit company itself is exempted from paying tax ( tax free ). Investors are tax at 10% only upon receiving the Div. Only applicable to reits, and not applicable to other companies. Whether dividend is paid or not.

For sharing what i think only.

Correct me if I am wrong.

This post has been edited by SKY 1809: May 24 2009, 08:25 AM
alfredfx
post May 24 2009, 12:38 PM

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you should discuss more about dividend yield and its relative comparison. Too, on the price earning , dividend policy as well as capital structure.
Jordy
post May 24 2009, 12:53 PM

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kmarc,

Generally this post is almost perfect, just need to amend a bit smile.gif

QUOTE
Ex-dividend date (better known as ex-date)

The date after the dividend is allocated (note the word "allocated" as the dividend is not actually paid to shareholders yet)
Shares bought and sold on this day onwards will no longer come with the dividend
The stock price usually decrease on the ex-dividend date by an amount roughly equal to the dividend paid
This reflects the decrease in the company's assets resulting from the declaration of the dividend.
Please bear in mind that you CAN sell the shares on the ex-date and STILL receive the dividend (selling on ex-date comes with the dividend).

In your diagram, I think you should state that interest received from FD of less than RM 100k is not taxable. Whatever over RM 100k is taxable at 5%.

Also, may I suggest that you explain about franked dividends and its tax rate (still valid until 2012) and single-tier dividends (every company has to abide it after 2012). For franked dividends, investors can STILL claim the additional tax from IRB until 2012 only.
ckk125
post May 24 2009, 12:53 PM

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also, split share and rights issue?

Im also learning...i guess if there is additional info on this, it would be great, especially for beginners.
Jordy
post May 24 2009, 12:59 PM

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QUOTE(ckk125 @ May 24 2009, 12:53 PM)
also, split share and rights issue?

Im also learning...i guess if there is additional info on this, it would be great, especially for beginners.
*
ckk125,

Split share is another term for bonus issue (eg if you hold 2000 units of shares in company A and it pays you bonus share of 1:2 ordinary shares held and say its price was RM1.00, then after the ex-date you will be holding to 2000 + 1000 units, while its price will now be RM 1.00 / 3 * 2 = RM 0.67).

Rights issue is NOT dividend. It is the right of a shareholder to purchase the new issues by the company. Those without the company's existing shares cannot purchase the additional rights issues.
kmarc
post May 24 2009, 01:05 PM

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Thx to all for your valuable information.

My main rig's LAN already kaput. Need to go out and buy a new NIC. doh.gif

Will be back later to update the thread. smile.gif
simplesmile
post May 24 2009, 01:11 PM

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Can also explain what is
a. 5 sen dividend less 25% income tax
b. 5% dividend less 25% income tax

In (b), the amount is based on the par value of the shares, which could be RM1.00 or RM0.10.
Also would be great if you can explain the "less income tax" part and going forward will be tax exempt. A little history of the imputation tax systems and its change to the single-tier tax systems in ..... i think 2007, or 2008, may help readers to understand.

Your header "In-dividend date (better known as entitlement date)"
Instead of "in-dividend", maybe you want to use "cum-dividend"?
.
.
.
.

This post has been edited by simplesmile: May 24 2009, 01:14 PM
kmarc
post May 24 2009, 04:08 PM

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Just bought a new NIC! rclxms.gif RM25 with no discount. vmad.gif

QUOTE(SKY 1809 @ May 24 2009, 07:43 AM)
"companies under REITs (Real-estate investment trust) usually have a policy of giving out 90% of their profits as dividends."

Complying with the 90% pay out rule,  the reit company itself is exempted from paying  tax ( tax free ). Investors are tax at 10% only upon receiving the Div. Only applicable to reits, and not applicable to other companies. Whether dividend is paid or not.

For sharing what i think only.

Correct me if I am wrong.
*
Updated. Thx!

QUOTE(alfredfx @ May 24 2009, 12:38 PM)
you should discuss more about dividend yield and its relative comparison. Too, on the price earning , dividend policy as well as capital structure.
*
Alamak! So hi-fi leh.... any links for me to read so that I can include that? Will google for it too.... wink.gif

QUOTE(Jordy @ May 24 2009, 12:53 PM)
kmarc,

Generally this post is almost perfect, just need to amend a bit smile.gif
Please bear in mind that you CAN sell the shares on the ex-date and STILL receive the dividend (selling on ex-date comes with the dividend).

In your diagram, I think you should state that interest received from FD of less than RM 100k is not taxable. Whatever over RM 100k is taxable at 5%.

Also, may I suggest that you explain about franked dividends and its tax rate (still valid until 2012) and single-tier dividends (every company has to abide it after 2012). For franked dividends, investors can STILL claim the additional tax from IRB until 2012 only.
*
Will include all the above. Thx.

Aiyaaa.... I don't even know what is franked dividends or single-tier dividends. Will google for more info....

QUOTE(simplesmile @ May 24 2009, 01:11 PM)
Can also explain what is
a. 5 sen dividend less 25% income tax
b. 5% dividend less 25% income tax

In (b), the amount is based on the par value of the shares, which could be RM1.00 or RM0.10.
Also would be great if you can explain the "less income tax" part and going forward will be tax exempt. A little history of the imputation tax systems and its change to the single-tier tax systems in ..... i think 2007, or 2008, may help readers to understand.

Your header "In-dividend date (better known as entitlement date)"
Instead of "in-dividend", maybe you want to use "cum-dividend"?
.
.
.
.
*
That will be the last part of this subtopic "Dividend and taxes".....

Will include the part of "par value too". Need to decide where to put that.

Aiyaaa.... you guys know more that me ler.... "imputation tax system"???? Single-tier tax system???? Me only noob ikan bilis la... blush.gif

Anyway, I still need to read more about what you guys mentioned above. Hope I can complete everything by tonight. smile.gif
kmarc
post May 24 2009, 09:00 PM

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QUOTE
Entitlement Date and time : 30/6/2009 5:00pm
Year Ending/Period Ending/Ended date : 31/12/2008
Ex-date : 26/06/2009
Payment date : 17/07/2009


Guys, I'm confused with the entitlement date. Example as above. Why is it 2 working days (or is it 3) after the ex-date? rclxub.gif Is it because of T+3? hmm.gif

Made an error..... looks like "cum dividend" is not the same as entitlement date!

This post has been edited by kmarc: May 24 2009, 09:01 PM

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