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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Small shareholder concerns over Coco Lanka rights issue

Small shareholder concerns over Coco Lanka rights issue

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Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
Share market rights activist K. C. Vignarajah has fired off another letter to the Chairpersons of the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) and their directors drawing their attention to irregularities in the recent rights issue by Coco Lanka.

“The Coco ‘Rights Issue’ is very unfair, unreasonable and oppressive to existing Independent Minority Shareholders (IMS), while unjustly enriching Controlling Interests (CI) and multilinked Related Parties (RP), who themselves have created much ‘shareholder fatigue’, he said in a letter.

This is because the total dividend payout for the last five years by the company has been only Rs. 3 per share out of Rs. 30 net Profit after Tax (PAT) per share; the issue price of Rs. 35 (voting), which on the average dividend basis, amount to about 35 to 55 of years dividend payout; the additional capital was sought to be raised in a mere six weeks; is more than 100 per cent of the value of the shareholder’s present holdings; and is impossible for most IMS to subscribe fully.

“The existing IMS, who could not take up part or all of the ‘Rights’ suffered tremendous loss of retained earnings and reserves (more than 10 times the dividends earned over last 5 years),” he added.

He said if the rights issue was allowed to be completed in its present “atrocious form”, the IMS should be compensated pro rata by the CI and directors of the company.

Mr Vignarajah said the SEC and the CSE should ensure this, while preventing such occurrences in the future, “if the IMS are expected to take very expensive legal action, while the CI will use part of IMS funds to fight the IMS.”
http://www.sundaytimes.lk/121216/business-times/small-shareholder-concerns-over-coco-lanka-rights-issue-24277.html

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
I am an existing independent minority shareholders of Renuka Shaw Wallace PLC. I did not take up my 'Rights' because the share was available at the same price.

Can someone explain how I have suffered tremendous loss of retained earnings and reserves?

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Proportion: - Five (05) new ordinary shares for every four (04) existing ordinary voting shares
Issue Price: - Voting - Rs. 35.00 / Non-Voting - Rs. 28.00
Qty Offered: - Voting - 27,000,000 / Non-Voting - 2,250,000
Date EX: - 19.Nov.2012

Hypothesis;
1. All offered rights will be converted to shares.
2. Avg price of current shares = 35/- (Assuming we bought the shares from last dip in 2010 August)
3. No brokerage

The right issue (with sub division after rights) Was announced on 12-10-12. Previous day close was 59.9. And immediately after the announcement, COCO.N witnessed a downtrend and on XR day hit a close of 38.6 and subsequently on 03-12-12 hit a low of 33.3 and closed at 33.9, below the rights issue price.
As per the last market close, this stands at 36.4 now.

Financials:
EPS (Qtr) - 1.70
NAV - 61.85
Shareholder Equity - 1,447,223,000
ordinary voting shares - 21,600,000
non voting shares - 1,800,000
Total no of shares after rights - 52,650,000

Say if you have 1200 shares @ 42000/-, as per the rights structure u're eligible to 1200/4*5=1500 additional shares. This means u'll have 2700 shares in total.

So according to my view;
If you didn't subscribe, ur current share investment would've gone down to 42000/5*4 = 33600/- or 960 shares though you actually have 1200 at hand.

Small shareholder concerns over Coco Lanka rights issue Coco10

If 36.4 represents 1 share, the new value would be 4.04/- (dividing by 4+5) in my view..
After rights conversion (if successful) NAV would drop to 27.48 (1,447,223,000/52,650,000)

I may be wrong so Let see how others could arrive at this.. Wink

P.S Seen this news??
http://www.cse.lk/cmt/uploadAnnounceFiles/8901354705236_461.pdf

S.R Rajiyah has purchased 2Mil rights @ 10 cents. His rights investment is 200000 and if he converts, he needs additional 70 Mil.

taniya1111


Manager - Equity Analytics
Manager - Equity Analytics
@smallville wrote:Proportion: - Five (05) new ordinary shares for every four (04) existing ordinary voting shares
Issue Price: - Voting - Rs. 35.00 / Non-Voting - Rs. 28.00
Qty Offered: - Voting - 27,000,000 / Non-Voting - 2,250,000
Date EX: - 19.Nov.2012

Hypothesis;
1. All offered rights will be converted to shares.
2. Avg price of current shares = 35/- (Assuming we bought the shares from last dip in 2010 August)
3. No brokerage

The right issue (with sub division after rights) Was announced on 12-10-12. Previous day close was 59.9. And immediately after the announcement, COCO.N witnessed a downtrend and on XR day hit a close of 38.6 and subsequently on 03-12-12 hit a low of 33.3 and closed at 33.9, below the rights issue price.
As per the last market close, this stands at 36.4 now.

Financials:
EPS (Qtr) - 1.70
NAV - 61.85
Shareholder Equity - 1,447,223,000
ordinary voting shares - 21,600,000
non voting shares - 1,800,000
Total no of shares after rights - 52,650,000

Say if you have 1200 shares @ 42000/-, as per the rights structure u're eligible to 1200/4*5=1500 additional shares. This means u'll have 2700 shares in total.

So according to my view;
If you didn't subscribe, ur current share investment would've gone down to 42000/5*4 = 33600/- or 960 shares though you actually have 1200 at hand.

Small shareholder concerns over Coco Lanka rights issue Coco10

If 36.4 represents 1 share, the new value would be 4.04/- (dividing by 4+5) in my view..
After rights conversion (if successful) NAV would drop to 27.48 (1,447,223,000/52,650,000)

I may be wrong so Let see how others could arrive at this.. Wink

P.S Seen this news??
http://www.cse.lk/cmt/uploadAnnounceFiles/8901354705236_461.pdf

S.R Rajiyah has purchased 2Mil rights @ 10 cents. His rights investment is 200000 and if he converts, he needs additional 70 Mil.
I think its better to calculate your NAV again, you may havent taken the amount of money coco lanka obtain from right issue into your calculation

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Small did you take into account that the rights are converted at Rs 35 and 28 . The NAV should not drop below rights price right as it is already much above?


@smallville wrote:Proportion: - Five (05) new ordinary shares for every four (04) existing ordinary voting shares
Issue Price: - Voting - Rs. 35.00 / Non-Voting - Rs. 28.00
Qty Offered: - Voting - 27,000,000 / Non-Voting - 2,250,000
Date EX: - 19.Nov.2012

Hypothesis;
1. All offered rights will be converted to shares.
2. Avg price of current shares = 35/- (Assuming we bought the shares from last dip in 2010 August)
3. No brokerage

The right issue (with sub division after rights) Was announced on 12-10-12. Previous day close was 59.9. And immediately after the announcement, COCO.N witnessed a downtrend and on XR day hit a close of 38.6 and subsequently on 03-12-12 hit a low of 33.3 and closed at 33.9, below the rights issue price.
As per the last market close, this stands at 36.4 now.

Financials:
EPS (Qtr) - 1.70
NAV - 61.85
Shareholder Equity - 1,447,223,000
ordinary voting shares - 21,600,000
non voting shares - 1,800,000
Total no of shares after rights - 52,650,000

Say if you have 1200 shares @ 42000/-, as per the rights structure u're eligible to 1200/4*5=1500 additional shares. This means u'll have 2700 shares in total.

So according to my view;
If you didn't subscribe, ur current share investment would've gone down to 42000/5*4 = 33600/- or 960 shares though you actually have 1200 at hand.

Small shareholder concerns over Coco Lanka rights issue Coco10

If 36.4 represents 1 share, the new value would be 4.04/- (dividing by 4+5) in my view..
After rights conversion (if successful) NAV would drop to 27.48 (1,447,223,000/52,650,000)

I may be wrong so Let see how others could arrive at this.. Wink

P.S Seen this news??
http://www.cse.lk/cmt/uploadAnnounceFiles/8901354705236_461.pdf

S.R Rajiyah has purchased 2Mil rights @ 10 cents. His rights investment is 200000 and if he converts, he needs additional 70 Mil.

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@taniya1111 wrote:
I think its better to calculate your NAV again, you may havent taken the amount of money coco lanka obtain from right issue into your calculation

That money doesn't come as shareholder equity I think when they put this into their plans..

That's why I've not taken the amt. scratch

Should be like this then;

Small shareholder concerns over Coco Lanka rights issue Coco211



Last edited by smallville on Tue Dec 18, 2012 9:36 am; edited 1 time in total (Reason for editing : corrected NAV result due to a wrong calc)

Fresher


Moderator
Moderator
@smallville wrote:
@taniya1111 wrote:
I think its better to calculate your NAV again, you may havent taken the amount of money coco lanka obtain from right issue into your calculation

That money doesn't come as shareholder equity I think when they put this into their plans..

That's why I've not taken the amt. scratch

Should be like this then;
Small shareholder concerns over Coco Lanka rights issue Coco210


small correction (big)
NAV result is wrong.

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
It's a simple calculation, really...
(i) NAV per share before Rights: Rs 61.85 (Refer Interim Report of Sep 2012)
(ii) No. of equity shares before Rights: 23.400 million
(iii) Therefore, NAV of the company before Rights = (i) x (ii) = Rs 1,447.29 million

(iv) Infusion through Rights Issue: Rs 1,008 million, assuming fully subscribed
(v) Expenses relating to the Rights issue: Rs 18 million

(vi) NAV of the company after Rights = (iii) + (iv) - (v) = Rs 2,437.29 million
(vii) No. of equity shares post-rights: 52.650 million
(viii) NAV per share after Rights = (v) / (vi) = Rs 46.29
(ix) NAV per share after Sub-division = Rs 46.29 / 2 = Rs 23.15

After the Sub-division in January 2013, there will be an abundant supply of COCO shares. In due course, however, I am hoping that COCO.N will stabilize above Rs 20 and COCO.X will trade above Rs 15.

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
npp wrote:


small correction (big)
NAV result is wrong.

Thanks.. corrected.. I was even wondering how the NAV has risen after rights but couldn't figure out. Finally I saw that my excel calc was wrong.
Instead of taking the shareholder funds with new funds, I've taken both increasing the shareholder funds Laughing So it made the whole thing wrong... I should not do these things in a hurry Twisted Evil

Anyways, what do u think, can we take these new money to shareholders funds since its being used for new investments?

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Antonym wrote:It's a simple calculation, really...
(i) NAV per share before Rights: Rs 61.85 (Refer Interim Report of Sep 2012)
(ii) No. of equity shares before Rights: 23.400 million
(iii) Therefore, NAV of the company before Rights = (i) x (ii) = Rs 1,447.29 million

(iv) Infusion through Rights Issue: Rs 1,008 million, assuming fully subscribed
(v) Expenses relating to the Rights issue: Rs 18 million

(vi) NAV of the company after Rights = (iii) + (iv) - (v) = Rs 2,437.29 million
(vii) No. of equity shares post-rights: 52.650 million
(viii) NAV per share after Rights = (v) / (vi) = Rs 46.29
(ix) NAV per share after Sub-division = Rs 46.29 / 2 = Rs 23.15

After the Sub-division in January 2013, there will be an abundant supply of COCO shares. In due course, however, I am hoping that COCO.N will stabilize above Rs 20 and COCO.X will trade above Rs 15.

You've also deducted the right issue expenses.. pretty smart ha? Razz

However, after sub-div, COCO will not be attractive though we talked of it earlier even. After rights share price is going to be ard 15-16 imo since liquidity is increased.

Then again the new voting shares 48.6 mil will be doubled and it further brings down the attractiveness of this. So the expected price is around 10 for me even though the NAV is going to be 23.15.

Fresher


Moderator
Moderator
Yes the new money will be taken in as shareholder equity. After all it is the shareholders' money.

So the double entry would be credit Cash and credit Equity

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
The calculation is being revised due to the Rights Issue having been undersubscribed...

(i) NAV per share before Rights: Rs 61.85 (Refer Interim Report of Sep 2012)
(ii) No. of equity shares before Rights: 23.400 million
(iii) Therefore, NAV of the company before Rights = (i) x (ii) = Rs 1,447.29 million

(iv) Infusion through Rights Issue: Rs 831.433 million
(v) Expenses relating to the Rights issue: Rs 18 million

(vi) NAV of the company after Rights = (iii) + (iv) - (v) = Rs 2,260.723 million
(vii) No. of equity shares post-rights: 47.273 million
(viii) NAV per share after Rights = (vi) / (vii) = Rs 47.82

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