Tuesday, July 21, 2009

Lessons From The Astro Exercise



Even when you predict correctly that a corporate exercise is forthcoming, you still risk not making money and even losing money because you do not have all the details of the exercise. Unless I am the actual CFO handling the deal or the bankers advising the deal, the risk in not knowing everything is there. If I do know everything, then I would be dealing on insider information, which is illegal.

a) Its likely to be a sale of foreign operations to Usaha Tegas, which is not a buyout offer for Astro shares. A buyout would set a minimum price to be offered to shareholders, thus raising the bar and transaction platform towards that level. Say the buyout is RM4.00 or RM4.20, the share price would gravitate towards that level. Since this is not a buyout of Astro shares, there may be some disappointment, hence some who were holding trading positions got out.

b) Silly to suspend the shares for one session and then to announce NOTHING. This is very poor form by Astro. Why suspend for one session and say nothing??? You could have made the same announcement that the company is considering some alternatives, without needing to suspend the shares. You suspend then NOTHINg concrete comes out, people will be disappointed.

c) The Straits Times seems to have a scoop on the coming deal. It cited a RM1 special dividend, which is very good. Getting rid of the cumbersome foreign operations to Usaha Tegas will bring cash to Astro without the accompanying risk and uncertainty and gestation period needed to bring forth positive cash flow from the overseas operations. But Astro made no such announcement??!!

d) How should one regard the shares at this juncture? I would still hold it till a proper announcement is made.


p/s photo: Ema Fujisawa

6 comments:

yloon said...

yeah, i think to hold too, but for those who buy in at 3.60 level, do you think it is worth to hold it or cut lose and buy back again?

Geoff said...

The dividend is a distraction. "c" is favorable to Astro shareholders only if UT pays a premium for the foreign operations investment outlay. Tks for addressing this head on and taking it to a close.

a said...

Sir,

I have problems with this so-called
"scoops" aka Insider Info.

Unless the journo is a psychic, some invisible insider mouths were behind the news to plant the story!
SC and BURSA should come hard on the issue.

So many cases appeared in the past in the media and gave excitement to prices being chased upward....only to be denied by the company later. And the big losers were always the gullible investors. There are enough legal actions to take but unfortunately no enforcement by the authorities.

Scoops?
More likely a concerted "cheating/misleading" news! And yet we want to be a world class stockmarket but a pasar malam enforcement.

see said...

If Astro gonna end up as M'sia only operation then its gonna be another boring dividend yielding stock....boring

callme said...

Dali,

I think this is why market is unpredictable. No one can guarantee your return, just make sure you do not throw all eggs in one basket. I too bought Astro shares, wait and see.

emacro said...

What is the definition of 'insider'?

If one knows of info not publically available, and tell someone who act to buy/sell that stock or one acts to buy/sell the stock, then one is an insider, correct?