Homepage
PR Newswire
19-08-2014, 12:15 PM
Hi Portuser
On further reflection, I feel that it is NOT CORRECT to adjust the NAV as suggested by you.
The fact is that without the rights issue, New Toyo would not have been able to proceed to secure the 7-yr contract with BAT.
Hence, we should include the dilution impact (due to the rights issue), rather than to "adjust" the NAV upwards to remove the dilution impact.
Hence, my former argument stands, i.e. there is no shareholder value created from the point of view of equity holder in New Toyo.
NAV is analogous to "GDP per capita" concept while shareholder's equity is akin to "absolute GDP $".
We need to look at both in most cases. But for this case, NAV is the better measure from each unit of share's pt of view.
Views appreciated pls. tks.
On further reflection, I feel that it is NOT CORRECT to adjust the NAV as suggested by you.
The fact is that without the rights issue, New Toyo would not have been able to proceed to secure the 7-yr contract with BAT.
Hence, we should include the dilution impact (due to the rights issue), rather than to "adjust" the NAV upwards to remove the dilution impact.
Hence, my former argument stands, i.e. there is no shareholder value created from the point of view of equity holder in New Toyo.
NAV is analogous to "GDP per capita" concept while shareholder's equity is akin to "absolute GDP $".
We need to look at both in most cases. But for this case, NAV is the better measure from each unit of share's pt of view.
Views appreciated pls. tks.
(22-07-2014, 04:32 PM)portuser Wrote:(20-07-2014, 10:06 AM)Curiousparty Wrote: Equity per share or roughly NAV has remained the same pre and post BAT contract.
Pre-BAT contract
2005 - 35.34 cents
2006 - 34.61 cents
2007 - 38.90 cents
Pre-BAT contract, Ave NAV = 36.3 cents
fast forward (post- BAT contract)
2011 - 36.49 cents
2012 - 36.57 cents
2013 - 35.64 cents
Post-BAT contract, Ave NAV = 36.2 cents
Based on NAV, there is in fact NO shareholder value creation from the BAT contract (IMHO).
The 3-for-5 rights issue, at a low price of 12 c per share in 3Q 2010, enlarged the number of New Toyo shares from 275m to 439m, and caused NAV per share to plunge from 47c to 34c.
2007 NAV of 38.90c in Curiosparty's post is based on the number of New Toyo shares before the right issue; whereas 2013 NAV of 35.64c is based on the enlarged number of shares.
Fair comparison requires both NAVs be based on a common number of shares; and such adjustment will result in a NAV of 24.3c (38.9c divided by 1.6) for 2007.
The average NAV per share between 2005 and 2007 is therefore 22.9c, 13c lower than the average of 36.2c for the recent three years.
The increase in shareholder value can be demonstrated in a more direct way.
Shareholder fund stood at $157m as at 31 Dec 2013, $ 47m higher than Dec 2008, when the exclusive BAT printing contract came into being.
Between 2009 and 2013, New Toyo paid $45.6m in dividends.
Shareholders contributed $19.5m during the rights issue in 2010.
Value enhancement therefore amounts to $ 76m (=50 + 45.6 – 19.5).
Whether the $76m enhancement represents sufficient return to individual shareholders or not is another matter altogether.
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]