Xingquan's TDR

• mosea said...
  You have mentioned about Xingquan in the past. What or how do you see its recent ambitious foray by listing in Taiwan through TDR?

• Regarding Xingquan
• Quick Review Of Xingquan's Earnings

On Star Business: Xingquan plans to sponsor issuance of Taiwan depository receipts programme

• Xingquan said the proposed programme would involve the issuance of TDR to investors in Taiwan that represented up to 46.099 million new ordinary shares of 10 US cents each in Xingquan, representing 15% of the existing issued and paid-up share capital of Xingquan.
• The proposed TDR programme was expected to rake in about RM76.06mil based on the indicative issue price of RM1.65 for each underlying share, it said.
• “The proceeds will be used for the expansion of sales and distribution network (RM44.55mil), point-of-sales makeover as part of the rebranding exercise (RM26.51mil) and the balance as expenses for the proposed TDR programme (RM5mil),” it said.

Pricing is 1.65.

Shares will be diluted by 15%. ( Xingquan's share will increase from 307,330,000 to 353,429,500 )

Company will rake in 76 million from this exercise.

I am puzzled as usual. :P

It's a fund raising exercise which will dilute current shareholder's earnings by 15%. ( To be more exact and precise, the TDR will list end fy 11, which means the dilution of earnings will only be felt in 2012. )

In the posting, Regarding Xingquan , there's still plenty of money raised during Xingquan's IPO which had not been utlised. ( see table here ) and as highlighted in that posting, Xingquan also wants to expand and expand. So despite the huge cash left ( see posting Quick Review Of Xingquan's Earnings ), apparently the cash is not enough.

Hence this TDR.

And apparently, CIMB is very positive on this news!

So positive that Xingquan's share price target is raised from 3.12 to rm 3.49. :P

Here's the screen shot.



Now I am puzzled... yet once more.

CIMB acknowledged the fact the earnings per share will be diluted come 2012.

Now check out the earnings forecast. Xingquan is projected to see its net profit grow from 105.2 million in fy 2010 to 150.7 million in fy 2011. That's a 43.2% growth.

:P

But the valuation is not based on this super growth!

:P

It's based on 2012 earnings.

Which means Xingquan's earnings will grow by another 13.1% to 170.4 million!

Yes!

CIMB is saying Xingquan is worth so much because it's earnings will grow from 105.2 million to 170.4 million!

This is what CIMB is basing its valuation of Xingquan upon. ( Err.. come 2 years... will anyone remember this at all? :P )

Anyway... check the eps row. Apparently CIMB have not considered the 15% dilution of eps. How? Would you consider the dilution of eps now? Or wait till 2012? :P

Well if I take 170.4 million to be the holy grail and use 353 million as the share base, Xingquan's diluted eps should be 48.3 sen. And a 6x earnings multiple = ...... ?

Xingquan last traded 1.64.