Saturday, January 08, 2011
Hap Seng Consolidated Revisited
Assume 1,000 Hap Seng Consolidated
Cost = RM7,500
Bonus Issue: 2,000 shares
Total shares: 3,000 shares
Rights Issue (1 for 5): 600 shares @ RM1.33 = RM798
Warrants Issue (1 for 5): 600 warrants free
Total cost: RM8,298
Holdings: 3,600 shares + 600 warrants
Theoretical ex-all share price: RM3.00 - RM3.20
Theoretical warrant price: RM1.50 - RM1.80
Dividend @ 11 sen = RM396
Shares Value: RM10,800 - RM11,520
Warrants Value: RM900 - RM1,080
Potential Proceeds: RM12,096 - RM12,996
Cost of Investment: RM8,296
Potential Return (on the 3 month exercise): +45.8% to +56.6%
I am not the only one punching the calculator. The proposed placement of 124.532m new shares @ RM6.49 will bring about some RM808.21m cash to the company. Of that sum, RM240m is for capital expensiture for the existing group's businesses. RM300m is to pay down borrowings, and RM268m for working capital.
The rights issue will bring about another RM654m cash to the company. Of that, some RM220m is for potential land acquisition, RM200m for repayment of borrowings and RM234m for working capital.
Thats a lot for working capital if you add RM268m plus RM234m = RM502m.
Considering the amount for working cap and expansion, the company has injected a war chest of RM502m + RM460m = RM962m. In addition it will be paying down some RM500m in borrowings as well.
The new paid up will see some 2.689bn shares plus 448m warrants.
My theoretical ex-all price is based on the new fundamentals for the company, I could wrong or over-optimistic here of course. As things stand the ex-all price is around RM2.30. Judging from the lucrative exercise, there should be few sellers leading up to the ex-date. It should be well supported up to RM8.00.