Utilico Emerging Markets Share Discussion Threads

[kenmitch] 16/8/2017 17:32

killing time.

re trustee. IF you can get near to the right price it is best to sell UEMS rather than risk the trustee. Sometimes trustee gets a very good price (e.g recently with Vietnam Holdings warrants) but sometimes not. Sometimes the market makers widen the spread and by hammering the sell price up to a month before final expiry date - though this didn't happen with PCFS recently. IF that happens the only way to get full value for UEMS would be to exercise as many as you can afford to, and risk the trustee for the rest. If the final sell price for UEMS is way too low then trustee is almost certain to get a better price.

[kenmitch] 16/8/2017 17:25

Agree re interesting posts but also an "if only!"

Why "if only?". Because if only far far more had realised what wonderful investments warrants and subscription shares are they would not have dwindled from hundreds to choose from to just a handful and very few of those worth investing in.

Here's an extreme example of how easy it was to do well with warrants and in very good years almost impossible not to. In 1993 there were hundreds of warrants to choose from. That year only 2 warrants fell in value over the year. The average gain for all the warrants was an incredible 222%. 70% of the warrants at least doubled that year. Sphere Investment Trust warrants went up 18 times.

I've been investing in warrants since 1989 and am a founder subscriber to what was once an invaluable monthly warrant newssheet, Warrants Alert. Warrants have been by far the most successful part of my investing. I'm a low risk investor who otherwise invests in quality shares - now using the brilliant Stockopedia for some of those.

Those who just want out of the subs (UEMS) at the first opportunity and prefer the shares and dividends imo just don't get it. Those who don't and didn't get it are the reason there are now so few left!

So is it really better to hold UEM in preference to UEMS?

Aside from earlier trades, including one at a significant loss when the share fell to 155p, I've been back in UEMS since July last year. The the share was about 195p and UEMS were 18p to buy. The share has gone up 15% to 225p to sell. UEMS has almost doubled to 35p to sell.

So EITHER buy 30000 UEMS at 18p for a cost of £5400 last July

OR

Buy 10000 UEM share at 195p for a cost of £19500.

That 30000 £5400 UEMS buy is currently worth £10500. PROFIT £5100.

That 10000 £19500 UEM buy is currently worth £22500. PROFIT of just £3000.

So those buying the shares have risked an EXTRA £14000 and have got a current profit £2100 less than if investing in UEMS instead. Dividends won't make up that much!

Yes, the subs are riskier if markets turn nasty. But when markets did turn nasty for a while I sold UEMS for a loss and was then out until buying again last year.

Even if it goes badly wrong the losses on a £5400 subscription share stake are often much smaller than the losses on a £19500 share stake.

Warrants and warrant pricing are so simple and it is so easy to invest in them successfully. Also note that the market makers don't seem to understand them either because UEMS (and this has happened to plenty of other warrants over the years) are at a simply barmy wrong price. UEMS were worth 42p when I added 5000 earlier today at just 35p. The price should be around 45p to allow for the remaining time value left.

Re market makers also not understanding them. Geiger Counter subs could be bought for just 0.8p when the quoted spread was 0.75p to 1.5p and the share with over 6 months to run was not much below the exercise price. I bought a smallish stake then and it went up 59 times in a few months, though being too cautious I sold most of mine too soon.

"picking up dimes in front of railroad engine???????"

[vacendak] 16/8/2017 16:01

@jonwig
Like you and possibly KT, I ultimately want UEM. Buying UEMS for me was just like putting a deposit towards the purchase. If the market discounted UEMS when I bought them, that's more money for me. And as we all agree, if the sh*t hits the fan before February and UEM tanks, losses will only be on UEMS and not the fully priced UEM.

KenMitch and others know how to deal in warrants/subs and are winning. I am also glad they are because it means that UEM is doing well. This is the kind of game I do not think I would be good at playing, so I am not playing it.

Anyway, another good day for UEM as Dave and Getscenic have already mentioned: Highest NAV so far 251.90p (up again today).

[jonwig] 16/8/2017 15:20

Interesting academic discussion, I suppose. I got my subs, exercised them at the first opportunity and cashed some extra dividends. The rest seems like picking up dimes in front of a railroad engine.

[getscenic] 16/8/2017 14:01

Make that a new high today as well Dave

[killing_time] 16/8/2017 10:11

Hi kenmitch, this is what im trying to understand. You say you sell out before expiry or risk the trustee selling them. How much risk is there from the trustee getting a bad price or are we talking a few % for their costs, thanks.

[kenmitch] 16/8/2017 09:47

Kt.

Yes that's how to work out your profit if exercising.

Exercising should be free of charges.

fwiw. Unless I'm very keen on the share, I usually just trade the subs and
don't exercise. i.e sell out of UEMS ahead of expiry or if spread too wide
risk letting them lapse and risk the trustee, but that's just a personal preference.

Spread varies. Sometimes narrow for UEMS, and when wide often
possible to deal well inside spread. Nearly always narrow for UEM.

Worst case for UEMS is share falling about 17% to or below 183p exercise price. Should get chance to sell long before it gets that bad unless big market crash. Then 10000 UEMS if bought at current 35p would mean £3500 loss. (A lot smaller loss for those who bought much lower).

As Riverman77 posted - UEMS gives roughly the same upside/downside as 6 times the £3500 in UEMS..i.e £21000. So if UEM fall 17% then cash loss is about the same.

[killing_time] 16/8/2017 07:49

Thanks Riverman77

[killing_time] 16/8/2017 07:08

I have to disagree with the i dont understand sub shares.
I know i can sell at any time. What i was trying to get at is when the last exercise date passes is it that simple that if Uem were 222p you simply add your buy price say 31p to 183p then the difference is your profit, ie will there be hidden charges, also the large spread for selling.

Best to leave this now as i have the answers i wanted, again thank you.

Edit: i realise that i havnt put what im trying to say very clearly and its coursing confusion. Dont want to sell because large spread and i see value holding these to the end then exercising what i want then letting rest expire. Kt.

[riverman77] 15/8/2017 22:23

I guess it depends on what you think will happen to uem share price. If it goes below 183 then sub shares will be worthless. If the price stays at 222 then the sub shares would be worth around 39, so a decent profit from today's price of 35p
Ultimately I would say if you want exposure to uem, then the sub shares seem a very cheap way of getting this exposure, but remember to divide the exposure you want by around 6 (since 35p uems shares gives exposure to 223p uem share).
When I put this through the black Scholes option calculator using a conservative volatility of 15%, I think it said uems was worth around 41p so clearly very cheap at 35p.

[kenmitch] 15/8/2017 22:16

You don't seem to understand warrant/sub share basics.

E.g Note rivermann77's key point. £2000 invested in UEMS gives you roughly the same cash profit as £12000 invested in UEM.

And note key point in my previous post.You can sell UEMS at any time.

If UEM is 222p UEMS are worth 39p. Exercise price is 183p. It's simple arithmetic! 222p is 39p higher than 183p.

[killing_time] 15/8/2017 21:24

Ok starting to think I should just buy more UEMS and not exercise.

If I didn't exercise at the last date in Feb 2018 does anybody know roughly what price I would get if UEM was at 222p, thanks KT.

[riverman77] 15/8/2017 20:50

But don't forget uems is effectively around 6x levered at current price of 35. With uem currently at 223, a 14% rise in its share price will double the value of uems. So if you say want 12k exposure to uem you could achieve that by just putting 2k or so in uems,leaving 10k to invest elsewhere.

[killing_time] 15/8/2017 20:14

Thank you both kenmitch and vacendak for your views and information.

I hold UEMS in both my ISA and SIPP with HL who I have just notified tonight to ask why no news on the exercise.

I was looking to exercise my SIPP holding to lock in at a price of 214p which would boost my profit because of the new monies going into the conversion.

I totally agree that holding UEMS will have greater reward than holding UEM in a rising market ( this is why im keeping UEMS in my ISA )but the size of funds I would be willing to put into UEM is greater than what I would be comfortable holding in UEMS. hope this makes sense.

Thanks again for your help, KT.

[kenmitch] 15/8/2017 13:14

killing time.

If you really want to switch to the shares you can do so at any time by selling your subscription shares and buying the shares with the proceeds. i.e presumably you realise that you can buy and sell the sub shares at any time?

As explained above I can see no advantage at all in exercising now, and the sub price rise today, which is far larger than the share price gain also shows you why. Share UEM up 0.7% and UEMS up 11%. Why give that sort of gain up by switching to the shares now?

The sub shares as davebowler posted are still at a bargain price, so why even think about exercising now and losing potentially big gains from UEMS. If at any point you get worried about UEMS price falling fast, then SELL them. If wanting to sell out it is best to do so on an UP day for share and sub as it is much easier selling then and often well inside the spread.

You might even get the chance to take the profits on UEMS once worried about the share price, and then wait and hope for the share price to fall and then use the sub proceeds to buy the share cheaper then. i.e these tactics give more flexibility than if exercising now.

btw like vacdenak I also got notification from my online broker (TD as was) about opportunity to exercise a while ago.

[vacendak] 15/8/2017 09:56

@KT
As mentionned by KenMitch, it is indeed for your broker to notify you.
He is right about the difference in vocabulary. I used to have warrants for Utilico (now UIL Ltd, also run by ICM like UEM) in the late noughties from my UTL shares in my ISA, I exercised some of them but got paper shares sent to me by post. Of course, these could not be put back under the ISA umbrella. So depending on how you hold them (ISA or not) the name does make a difference.

[edit]: My original post was wrong: I had the warrants "from" my shares held in my ISA, so never technically had them "inside". The distinction remains: Subs are fine for ISAs but not warrants.


I am with Equiniti/Shareview.
For this round of subscritption, I received my "corporate action notification" via the website secure email on August 1st.
The deadline to notify Equiniti about how many UEMS to convert is August 22nd, date at which the funds are taken.
On September 14th UEM should receive the monies and issue shares. These will in turn be credited to my Equiniti account a few days later.

The process ran smoothly in February when I exercised some of my UEMS.

So if you have not heard anything yet, you should contact them now and ask to be notified formally in the coming days, as I assume the deadlines should be roughly the same for your broker to collect their orders and notify UEM.

[killing_time] 15/8/2017 07:04

Thanks Kenmitch. Still havn't made my mind up if i will exercise this month but i do want to hold a sizable amount of UEM shares at some point. KT.

[kenmitch] 14/8/2017 21:15

Yes. Your broker should notify you. But imo if you think the share price is likely to go higher it is FAR better not to exercise now and just continue to hold your subscription shares. The subs will go up MUCH faster.

e.g if share goes up 15% by next Feb to around 250p UEMS would be worth 67p and DOUBLE the current UEMS price.

And even if share only goes up a bit fro 220p to 230p UEMS would be worth 47p. Hence davebowler post today saying UEMS looks a bargain again.

Btw. You called UEMS Warrants. They are actually subscription shares. Warrants and subscription shares are exactly the same thing, except if called a subscription share it can go in to ISAs but if called a warrant it can't!

[killing_time] 14/8/2017 19:04

Hi, Is it possible that someone can answer a question I have.

I currently hold UEMS warrants and they exercise at the end of this month, will my broker contact me to see if I want to exercise the warrants as it seems that time is running out. Thanks KT.

[davebowler] 14/8/2017 16:24

UEMS looks a bargain again.

[kenmitch] 20/7/2017 17:26

Strongly agree davebowler. Upside for UEMS is around 5 times higher.
So £1000 in UEMS would give same profit as £5000 in UEM. So why invest the extra £4000 and also why exercise next month?

[davebowler] 20/7/2017 16:16

UEMS is still the better buy to gain exposure to this even after the jump today.