Question

Today is 21 May (Thur), and following is the real-time quotation of Stock A listed on HKEX.

LOT SIZE: 500

OPEN: $3.22

BID: $3.38

ASK: $3.40

LAST: $3.39

CHG: -$0.14

EPS: $0.25

MKT CAP: 22.3 b

(a) What was the closing price of Stock A on the previous trading day?

(b) Based on the latest transaction price, compute the P/E of Stock A.

(c) If you want to purchase Stock A immediately, what is the price that you should set in your buy order?

(d) After your purchase in (c), when will you become the legal owner of Stock A?

(e) Company A just announced a 1-for-2 rights issue at 35% discount of its latest transaction price. Suppose you hold 6 lots of Stock A. If you want to exercise your rights entitlement in full, how much money do you need (excluding all transaction fees)?

Answer 1

a]

last price = closing price + change

$3.39 = closing price + (-$0.14)

closing price = $3.25

b]

PE = last price / EPS

PE = $3.39 / $0.25

PE = 13.56

c]

The price you should set is the ask price of $3.40

d]

You will become the legal owner after the shares are credited into your account. Based on the settlement cycle, which is usually T+2, you will be become the legal owner after 2 business days

e]

Number of shares you can subscribe = number of shares held / rights issue ratio

Number of shares you can subscribe = 6 / 2 = 3

Money required = number of shares you can subscribe * last price * (1 - 35%)

Money required = 6 * $3.39 * (1 - 35%)

Money required = $13.22