SSI starts issuing covered warrants

SSI received permission to issue the covered warrants from the State Security Commission of Việt Nam.

Covered warrants, which are expected to start trading from June 28, would offer new opportunities to investors as well as help them limit losses and make higher profits amid market volatility.

Covered warrants are issued by a securities company, and the trading of covered warrants is similar to that of underlying stocks. They are always associated with underlying stocks.

In the first IPO, SSI will issue covered warrants with a conversion ratio of 1:1 for the Military Commercial Joint Stock Bank (MBB) stock, with the issuance of up to 3,000,000 warrants for a three-month term.

The underlying stock of MBB has a market price of VNĐ20,600 (US$0.88) per share but SSI issues covered warrants of MBB at only VNĐ1,900 per unit.

According to SSI Research, MBB is a leading financial group in Việt Nam, operating in many areas such as banking, consumer finance, life insurance, non-life insurance, securities, fund management and debt trading.

The bank ranks sixth among commercial banks in Việt Nam in terms of asset scale and revenue, and ranks third in the system of asset quality indicators.

MBB has high growth potential since it has a high Current Account Savings Account (CASA) ratio (at 42.1 per cent), which is much higher than other banks and creates a competitive advantage for MBB, thanks to lower cost of capital than the industry’s average.

Net interest income is improving as the proportion of retail loans and consumer credit is rising.

In addition, its subsidiaries have completed their restructuring and achieved more fruitful results. Pre-tax profit of subsidiaries in 2019 is expected to increase by 99 per cent over the same period last year.

In particular, the insurance business (MB Ageas Life, MIC) and consumer finance have huge growth potential.