Infratil warrants close attention

Friday 9th July 2004

A surefire way to increase interest in a company is to issue a new series of warrants. In Infratil's case this was hardly necessary.

With the infrastructure investor wanting to turn Whenuapai airbase into Auckland's second commercial airport there was already plenty for the punters to chew over.

But the company has decided to heat things up anyway, announcing a one-for-five pro-rata issue of five-year equity warrants, exercisable at $3.50 a share.

Getting any two brokers to agree on a valuation for the warrants was always going to be tough and as usual debates are raging over what they are worth.

First NZ Capital values the warrants at 33c each - 37% below the market price of 52c. The figure takes into account an ordinary share price of $3 with a volatility swing of 20% over the past year.

Goldman Sachs JBWere values them at 51c, noting the same price volatility but using a current share price of $3.13 for the ordinary shares.

For investors and shareholders warrants can offer a smart addition to a portfolio but due to warrants' risky nature, investors need to be attentive to market movements. Hence, investors will be watching the performance of Glasgow Prestwick Airport, in which Infratil moved to full ownership last year.

The airport is going through a passenger boom, due largely to the growth of Ryanair but there were new concerns about falling freight business at the airport.

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