For the uninitiated, Thakral Corporation is holding an EGM on the 4th of February to seek an approval from its shareholders on a 5cent cash distribution per share. Before anyone jumps in without looking, I would hope to provide a better view for all people who wish to become vested.
About Thakral Corp
As taken from their website.
Listed on the SGX Mainboard since December 1995 with its Distribution business headquartered in Shanghai, the People's Republic of China, Thakral Corporation Ltd is involved in the distribution business of consumer electronics sector, as well as strategic property and equity investments.
The PRC, Hong Kong and India are presently the Group's key markets for its products. The Group distributes an extensive consumer brand portfolio including global consumer electronics brands such as Apple, Asus, Canon, Casio, Fuji, Kodak, Lenovo, Nikon, Nokia, Olympus, Orion, Panasonic, Pentax, Samsung and Sony. Some of the major products distributed under these key brands include digital video cameras, digital still cameras, plasma TVs, desktop and notebook computers, personal digital assistants (PDAs), data projectors, electronic accessories, mobile phones and audio products including MP3/MP4/MP5 players.
In addition, the Group has also successfully created and marketed trendy consumer products such as audio players and accessories, LCD TVs, memory cards, portable DVD players and digital photo frames under its own “YES" brand.
Cash Distribution
Cash distribution occurs when the company has excess cash and has no use for it. In Singapore, as dividends are not taxed, dividends and cash distributions are similar, except that cash distributions are usually associated as a one-time payout.
About the Distribution
Thakral wished to reposition its primary business from consumer electronics distribution to real estate and related infrastructure. In view of the capital distribution announced on 1st Dec 2009, Thakral decided not to go ahead with the repositioning.
With a 5 cents distribution, share capital will be reduced to 72,528k, while EPS for the 9M09 drops to 0.15cents from 0.22cents. Equity is reduced to 92,886k from 223,692k.
Directors and Shareholders
Thakral Investments Limited has a direct interest of 7.44%, while Venture Delta Limited has a direct interest of 34.38%. The Thakral family has a deemed interest of 29.92%, with Jasvinder Singh Thakral has 5,200,000 share options under the employee option scheme. In short, Thakral Investments Limited has direct interest to SGD9.717million of the dividends paid out.
Vested?
I believe that the cash distribution is done without any harm to the company's day to day operations. However, there are 2 concerns that I wish to raise.
1) Thakral has posted a pre tax loss for 3 of the past 5 years. However, FY09 is slated to turn in a profit. My concern is what happens after the cash distribution, considering that they may not pay dividends after. Thakral has not paid out dividends since 2005.
2) The cash distribution is not approved yet, however when it is propsed on the 1st of December, Thakral Corporation moved up 3 cents, before closing at 8.5cents. Would the price drop more than 5 cents once the cash distribution is approved and XD comes around?
I am not vested but I thought I should write an article to inform people who wish to be vested in Thakral.
Showing posts with label Speculative. Show all posts
Showing posts with label Speculative. Show all posts
Thursday, January 21, 2010
Monday, December 21, 2009
The Curious Case of Teledata Ltd
About Teledata Ltd
Teledata is a leading communications services company, unique for the depth of our capabilities and the dedication of our people. Our people are experts in the dynamic field of communications technology and excel at delivering customised communications services and solutions to our customers.
Founded in May 1976, we have grown to be a regional company with offices in 8 countries and customers in 14 countries throughout the Asia Pacific region. Teledata works with customers from all industries and provide systems and services that are relevant to companies from the largest enterprises and telecommunication carriers down to smaller enterprises. Some of those customers have been with us for almost three decades since Teledata first started operation.
Teledata is listed on the main board of the Stock Exchange of Singapore and we have achieved ISO 9001:2000 certification.
Teledata’s Run-Up
Teledata’s stock price started moving on the 23rd Oct, opening at 0.015 and closing at 0.02. Currently as of 17th Dec, the stock price closed at 0.075, meaning a 275% gain from any investment made at 0.02.
How is the Daily Operations affected by the Stock Price?
Essentially, the ability for a business to operate as a going concern is not affected by the stock price. Rise and falls of the stock price does not directly bring cash into the company.
So what is the stock price for? It’s an indicator of how much one would pay for a share of the company. As the company benefits, so does its investors due to dividend payouts for example.
Even for companies that do not give out dividends, investors may still invest in the company as it may be undervalued, or the company’s growth prospects are higher as compared to other companies/industries.
Furthermore, as companies try to raise capital, instead of taking on more debt, they may issue rights to raise new capital. Rights are usually priced at a discount to the current market price, and a company that performs well is able to raise more capital through the issue of rights. During the issue of rights, the number of subscribers would naturally be all the shareholders to prevent their holdings from diluting.
For a simplistic view,
Amount of capital to be raised = price of newly issued shares x number of shares issued
A higher price of newly issued shares, which is determined at a discount of the current stock price increases the amount of capital that can be raised. Although an increase in the number of shares issued can bring about the same capital if the price of the newly issued shares are low, the current shareholders may not subscribe to the shares and instead sell off their holdings due to excess dilution. Excess dilution also results in share prices hitting rock bottom.
The Rise in Teledata’s Stock Price
The rise in Teledata’s stock price has little to do with fundamentals. Looking at their financial statements, Teledata has been in the red since 2002 (with the exception of 2006). In their latest half yearly unaudited financial statement, Teledata posted a larger loss as compared to 1H2008. All signs point to a company to avoid.
So what are the possible reasons for Teledata’s rise? There have been murmurings about a reverse takeover of Teledata, thus a major company that is buying into Teledata, pushing up the stock price. All these are rumours, and unless you are an insider, it is difficult to know the exact details surrounding the rise in the stock price.
In the SGX query on the 15th of Dec, Teledata’s response is that it is not aware of any information that was not previously announced. However, in this run up, Mertius Resources Ltd has been purchasing shares off the open market.
Fundamental Analysis and Reverse Takeovers
Companies with a low share price and relatively low float are prime targets for takeovers. In value investing and growth investing, we do not give absolute attention to the companies that are prime targets for these takeovers. Instead we find undervalued companies and/or project their growth possibilities.
I am not vested in Teledata, and its current shareholders may call me an idiot, but I don’t want to be the last man standing if the reverse takeover is just a rumour or if it falls through. The shareholders may have the last laugh, as we can all remember the case about Wilmar’s reverse takeover.
Good luck to the shareholders of Teledata Ltd. I hope that Teledata proves me wrong as it would be a learning experience for me. And please don’t be the last man standing.
Teledata is a leading communications services company, unique for the depth of our capabilities and the dedication of our people. Our people are experts in the dynamic field of communications technology and excel at delivering customised communications services and solutions to our customers.
Founded in May 1976, we have grown to be a regional company with offices in 8 countries and customers in 14 countries throughout the Asia Pacific region. Teledata works with customers from all industries and provide systems and services that are relevant to companies from the largest enterprises and telecommunication carriers down to smaller enterprises. Some of those customers have been with us for almost three decades since Teledata first started operation.
Teledata is listed on the main board of the Stock Exchange of Singapore and we have achieved ISO 9001:2000 certification.
Teledata’s Run-Up
Teledata’s stock price started moving on the 23rd Oct, opening at 0.015 and closing at 0.02. Currently as of 17th Dec, the stock price closed at 0.075, meaning a 275% gain from any investment made at 0.02.
How is the Daily Operations affected by the Stock Price?
Essentially, the ability for a business to operate as a going concern is not affected by the stock price. Rise and falls of the stock price does not directly bring cash into the company.
So what is the stock price for? It’s an indicator of how much one would pay for a share of the company. As the company benefits, so does its investors due to dividend payouts for example.
Even for companies that do not give out dividends, investors may still invest in the company as it may be undervalued, or the company’s growth prospects are higher as compared to other companies/industries.
Furthermore, as companies try to raise capital, instead of taking on more debt, they may issue rights to raise new capital. Rights are usually priced at a discount to the current market price, and a company that performs well is able to raise more capital through the issue of rights. During the issue of rights, the number of subscribers would naturally be all the shareholders to prevent their holdings from diluting.
For a simplistic view,
Amount of capital to be raised = price of newly issued shares x number of shares issued
A higher price of newly issued shares, which is determined at a discount of the current stock price increases the amount of capital that can be raised. Although an increase in the number of shares issued can bring about the same capital if the price of the newly issued shares are low, the current shareholders may not subscribe to the shares and instead sell off their holdings due to excess dilution. Excess dilution also results in share prices hitting rock bottom.
The Rise in Teledata’s Stock Price
The rise in Teledata’s stock price has little to do with fundamentals. Looking at their financial statements, Teledata has been in the red since 2002 (with the exception of 2006). In their latest half yearly unaudited financial statement, Teledata posted a larger loss as compared to 1H2008. All signs point to a company to avoid.
So what are the possible reasons for Teledata’s rise? There have been murmurings about a reverse takeover of Teledata, thus a major company that is buying into Teledata, pushing up the stock price. All these are rumours, and unless you are an insider, it is difficult to know the exact details surrounding the rise in the stock price.
In the SGX query on the 15th of Dec, Teledata’s response is that it is not aware of any information that was not previously announced. However, in this run up, Mertius Resources Ltd has been purchasing shares off the open market.
Fundamental Analysis and Reverse Takeovers
Companies with a low share price and relatively low float are prime targets for takeovers. In value investing and growth investing, we do not give absolute attention to the companies that are prime targets for these takeovers. Instead we find undervalued companies and/or project their growth possibilities.
I am not vested in Teledata, and its current shareholders may call me an idiot, but I don’t want to be the last man standing if the reverse takeover is just a rumour or if it falls through. The shareholders may have the last laugh, as we can all remember the case about Wilmar’s reverse takeover.
Good luck to the shareholders of Teledata Ltd. I hope that Teledata proves me wrong as it would be a learning experience for me. And please don’t be the last man standing.
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