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.

8 comments:

Fong said...

I just don't understand your maths. Pl note that 3 months ago, the share was only at RM3 and now you are asking people to pay RM8 with potential of another 50% increase. where is the value creation ? Pl note that RM92M of the profit is EI gain not operating profit.

I think SC should just investigate this case. Bonus and rights issue does not increase share value of company.

SailCool said...

whilst your comments seems about right wondering if there's any unseen hand pushing the prices down? or just wrong anticipation:P

SailCool said...

despite the figure crunching, the pricing appears to be pushed down or the investor is just not gungho abt the corp restructuring. what's your thoughts?

sanghani58 said...

To my opinion investors should take profit on Hap Seng and should invest in Kumpulan Fima earning per share is v. good and in the month of February , 2011 the performance of their result will be fantastic

KC said...

Oh no! The sky is falling!

SkinX said...

Hi dali,

Been following Hap Seng since your posting. hap seng dropped drastically from 7.30 to 6.20 in 2 days after the corporate announcement. Will appreciate your views. ^_^

thanks

sanghani58 said...

I did commented on this counter it is better to buy kumpulan fima then Hap Seng

gabriel said...

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 - RM11,520Warrants 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%

----Too optimistic calculation---real life calculation should be around RM9k (the 600 share warrant should give u only RM700 and the additional 600 share value would be around RM1400 in value after everything is done provided no share movement.

Your calculation for cost is correct= RM8.3k
Final value for my 3 shares @ RM2.30= RM6.90
Value from 600 share warrant + 600 rights share= RM2.1k

Total value @ market price= RM9k
ROI only 6% ex brokerage!!!!!!

You forgotten the final value of your share should adjust additional 10% reduction due to the rights issue.