As expected the stock traded 2 or 2.5 cents below 70 cent offer price.
Buyer could have been Clean Water (the Offeror) buying a little cheaper than its offer price.
Other buyers could be funds intending to profit 2-3% when the 70-cent offer is open by Clean Water. The 2-3% is not small as it can be realised in a matter of months. If it takes 3 months, then the annualised return is 8-12%.
There is a higher risk of this delisting offer not going thru because it is conditional on the Offeror getting at least 90% acceptance.
Some people are expecting the offer price to be revised upwards from 70 cents. I doubt it because there is a sufficient volume of trading at 68-68.5 for the Offeror to accumulate at. The PE of offer price is double-digit and the offer price is a big premium to trading price of 50-odd cents previously. Just my 2 cents worth
Can anyone please enlighten me on the below:
As at 31 Dec 10 Sinomem's NAV stands at 53+cents. Its EPS is 5cents+ a year. With the offer price at 70 cents, it means Sinomem's NAV will hit 70cents in just 3 years (or even lesser assuming earnings go up)? If this simple analysis is the case, than the P/E ratio of 10+ really counts for little since the shareholders are offered at a FV discounted to just 3 years.
Hi bemieguest. Nope, it wont be discounted just 3 years. Using your example (FY10 NAV per share and EPS: SG53 cents and SG5 cents respectively), assume that Sinomen reinvests 100% of its EPS earned in 2010 back to its business. Assume the most simplistic case with no change in accounting policy, no revaluation or writedown in assets, no bad debts, no acquisitions (everything status quo) etc and approx net margin of about 20% (derived from its reported financials but I use round figures). Sinomen should report SG6cents in EPS and SG54 cents in NAV per share at 31 Dec 2011. From this, you can see that Sinomen would take more than 3 years to generate a NAV per share of 70cts. FYI, your example assumes that Sinomen can reinvest its earnings of 5cents back into its business and grow its earnings at a phenomenal rate to about 17 cents. This is unlikely the case seen from Sinomenâs financials. (P.S: Do note that the NAV of SG53 cents has already taken into account of the 5cts EPS earned in 2010) Lastly just a side note, NAV and EPS have different calculations. EPS uses profit attributable to equity holders and divided by weighted ave no of shares whereas NAV uses net assets divided by the number of issued shares as at balance sheet date. This does not matter for Sinomen in 2010 because there is no change in the number of shares from FY09 to FY10. Do visit my remisier blog
www.ernestlim15.blogspot.com
for info on investment and finance. Have a gd wkend.
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