I have to interupt the dummies posting with this latest development from one of the S-chip companies. The majority owner of China Precision has decided to take the company private by offering S$0.28 to buy back all existing shares it does not not own. I am not a stakeholder in China Precision. Nevertheless, ALL MINORITY SHAREHOLDERS SHOULD REJECT THIS OFFER!
Why do I say that? Below are some reasons which i believe will support my view.
1) The company's IPO took place in May 2006 at a price of S$0.30. The exit offer is at a discount of 6.7%. This means that shareholders who held on to the shares since IPO will make a loss (lets exclude the dividends for the time being).
2) As of the latest financial report ending 30th June 2009, the net asset value (NAV) of the company is S$0.32 per share. Based on this, the exit offer is at a discount of 12.5%.
3) Currently, China Precision does not have any bank borrowings. Thus, the assets mainly consist of cash, property and plant equipment. It has RMB 143 million of cash which translate to a cash backing of S$0.08 per share. In short, the majority owner is only paying S$0.20 for the whole business.
4) For HY2009, the company made earnings of RMB 9 cents for each share. Using the exchange rate of S$1:4.5 RMB, the EPS is S$0.02. Assuming the EPS does not change, we will have S$0.04 for the whole year. Setting the exit offer at S$0.20 (minus the cash backing) means that the business is only valued at a forward P/E of 5X (Isn't that cheap?).
I will be looking forward to the response from the independent directors and the appointed financial adviser on this exit offer. Its time for shareholders to sit up and vote wisely.
Subscribe to:
Post Comments (Atom)
1 comment:
An example of the majority shareholders "ripping off" the minorities?
They aren't even offering a fair price - as evidenced by your analysis of NAV, EPS and their Balance Sheet. Sad but true.
Musicwhiz
Post a Comment