Please refer below listed note for negative goodwill that was originally mentioned in their q reports to get a rough idea about the bargain purchase.
some reasons for negative recurring EPS are
-This year ,Revenue was decreased by 33% compared to last year(Their revenue mainly come from Investment/Tea & Rubber)
-COS was increased by 329% in last 6 months(Waiting for their Annual reports)
I am mainly concern about their P/BV & Future growth.However I feel that it is a safe investment & gives us a some considerable return,may be more than 100% in mid term.
In long term i have an idea about their recurring EPS & revenue.But i don't want to discuss it now.Note for negative goodwill http://www.cse.lk/cmt/upload_report_file/1077_1338463413427.pdf
BrownsInvestmentsPLC(thegroup) acquired 100% shareholdings of Excel Global Holdings Pvt Ltd on 22nd July 2011. Upon this acquisition the group gained controlling interest of Millennium Development Pvt Ltd (MDL) which is a wholly owned subsidiary of Excel Global Holdings PLC. The cost of the acquisition was Rs.887mn.
MDL has leasehold rights to a block of land at TB Jayah Mawatha to the extent of 897Perches, presently known as “ExcelWorld”. The lease is for a further period of 32years with provision to extend the period for another 40 years, subject to conditions therein.
According to SLAS25(14), all business combinations shall apply the purchase method of accounting and SLAS25(16)(c)requires to allocate(at the acquisition date),the cost of the business combination to the assets acquired and liabilities and contingent liabilities assumed.
Further,SLAS25(36),requires acquirer to allocate the cost of the business combination by recognizing the acquiree’s identifiable assets and identifiable and contingentliabilities that satisfy recognition criteria provided inSLAS25(37)at their fair value at the date of the acquisition. Therefore, all identifiable intangible assets acquired in a business combination are recognized separately from good will and are measured initially at fair value at acquisition date
As such, the fair value of this intangible asset, being the lease hold interest in the property, has been incorporated in the accounts for the period in computing the goodwill on acquisition and the resultant negative goodwill of Rs2608mn is reflected in the group income statement for the period ended 31st March 2012.
For the purpose of ascertaining the fair value of leasehold interest, a valuation of the said lease hold interest of the property has been obtained from two Chartered Valuers based on comparable transactions. Mr.P.W.Senaratne, Chartered Valuer has valued the lease hold interest atRs5,102mn for a period of 72years and at Rs4,320mn for a period of 32years. Mr.KTD Tissera, Chartered Valuer has valued the leasehold interest of the property at Rs4,500mn for72years and at Rs3,500mn for 32 years. Of the two values, it has been decided to incorporate the lower valuation as given by Mr. Tissera as a matter of prudence.
MDL intends to develop this property as a mixed development over the next few years. It is planned that this development be in line with the terms of the lease agreement between MDL and the Lessor namely, the Incorporated Trustees of the Church of England in Ceylon. Specifically the development will be in line with the sixth schedule of the lease agreement and the approved development plan.All licenses granted to tenants would be granted for activities which are in keeping with the tents of the church.
On 1st October2011, Taprobane Plantations Limited an associate company of the group took over the business activities within the ExcelWorld formerly operated by MDL.As a result of this,the property was categorized as an investment property as provided for by the SriLanka Accounting Standards and consequently, the intangible assets was classified as an investment property using the fair value model, in terms of SLAS40(35).This investment property was revalued as at 31stMarch2012 resulting in a sum of Rs.250mn being credited to the Profit & Loss account.
npp wrote: market bull wrote:Negative goodwill arises when the price paid for an acquisition is less than the fair value of its net tangible assets.
Negative goodwill implies a bargain purchase. As per revised SLAS25 business combination/IFRS3, Full amount of Negative goodwill can be considered as an immediate extraordinary gain on the day of the sale rather than write down the gain to zero through series of allocations(may be some conditions there)
With revised standards for Business combination/Fair value adjustment/Investment property & etc,some companies can show a good profit,if they have valuable assets.
As you mentioned it is an investment company,I also wish,negative goodwill would be a part of the business.Also if stock market shows a upward momentum in coming months,their some of adjusted losses for shares also can be revised.
yes, i particularly wanted to know about these bargain acquisitions. were they really a bargain?
and again we can check the recurring EPS, if we neglect this, the recurring EPS will be in the negative.
How would you value this company? P/E or P/BV or any other means?
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