FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka


Submit PostSubmit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post



Latest topics

» ROYAL CERAMICS PLC (RCL.N0000)
by Dilip Today at 11:55 am

» GLAS will be winner with Super Gain.
by ronstyn53 Yesterday at 10:22 pm

» CIC HOLDINGS PLC (CIC.N0000)
by abey Yesterday at 9:07 pm

» First capital holdings CFVF.N0000
by invest thinker Yesterday at 4:46 pm

» LANKEM DEVELOPMENTS PLC (LDEV.N0000)
by Wolf86 Yesterday at 2:00 pm

» ???? අප්‍රේල් 16 ???? මේ දින 3 කෙටි සතියත් කොළපාටින් අවසන් වුනා
by dayandacool Yesterday at 1:58 pm

» Lanka Walltile PLC Investment Case
by judecroos Yesterday at 8:55 am

» Which is the best at current market condition ? ( At least 30% within 30 Days)
by judecroos Yesterday at 8:39 am

» Daily Foreign Transactions
by Pradeep90 Fri Apr 16, 2021 8:03 pm

» Big opportunity in Kegalle Plantations
by EquityChamp Fri Apr 16, 2021 2:58 pm

» RAIGAM WAYAMBA SALTERNS PLC (RWSL.N0000)
by stockchaser Fri Apr 16, 2021 2:42 pm

» විජේදාසගේ... voice cut ප්‍රතිඵල
by nigma Fri Apr 16, 2021 11:59 am

» If you buy a stock that’s not going up in price, you won’t make any money. STOCK market for beginners
by dayandacool Fri Apr 16, 2021 11:31 am

» B P P L HOLDINGS PLC (BPPL.N0000)
by vikiperera Fri Apr 16, 2021 11:17 am

» VPEL VPEL VPEL
by invest thinker Fri Apr 16, 2021 10:23 am

» Thoughts on SINS
by Swissinvest Fri Apr 16, 2021 10:04 am

» VFIN / VPEL / PABC - Share SPLIT or VTWO ?
by WealthKing Fri Apr 16, 2021 8:33 am

» DIPD/HAYC/HAYL
by Harry82 Fri Apr 16, 2021 5:46 am

» LANKA ALUMINIUM INDUSTRIES PLC (LALU.N0000)
by Jana Thu Apr 15, 2021 11:15 pm

» EXPOLANKA HOLDINGS PLC (EXPO.N0000)
by learningthemarket Thu Apr 15, 2021 8:18 pm

EXPERT CHRONICLE™

ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

CHRONICLE™ NEWS PRODUCTS

FINANCIAL CHRONICLE™

Views & Reviews, Analysis, Evaluations, Discussions, Gossip and Hot Tips relating to Sri Lankan companies listed on the Colombo Stock Exchange (CSE)
Contribute




DAILY CHRONICLE™

Latest news and articles published in Newspapers, Websites, Blogs and other online news sites relating to business and investments in Sri Lanka
Contribute



ECONOMIC CHRONICLE™

This is a section that provide news, views, analysis, predications relating to Political and Socio-Economic factors and how such activities affect the Stock Market and other economic activity of the Country.

Contribute




EXPERT CHRONICLE™

This is an exclusive section for Expert Articles which will help member to share knowledge through comments and responses of the members. All members are allowed to reply and make comments to these articles.

Contribute


Submit Post


CHRONICLE™ YouTube

Youtube Videos and other visual presentations relating Stock market and other investment advise submitted by members or other contributors.

Contribute


Submit Post


කොළඔ කොටස් වෙළඳපොළේ වංශකථාව
කොළඔ කොටස් වෙළඳපොළේ ලැයිස්තුගත සමාගම් කොටස් ගැන තොරතුරු¸විශ්ලේෂණ¸සාකච්ඡා¸ කටකතා¸රසකතා යන සියල්ල අපේම සිංහලෙන් කතා කළ හැකි ‘කතා මණ්ඩපය’

Contribute

Twitter Feeds
POPULAR COMPANIES
A

ABANS ELECTRICALS PLC

ACCESS ENGINEERING PLC Hot

ACL CABLES PLC

ACL PLASTICS PLC

ACME PRINTING & PACKAGING PLC

AGSTAR PLC

AITKEN SPENCE HOTEL HOLDINGS PLC

AITKEN SPENCE PLC

ANILANA HOTELS AND PROPERTIES PLC

ARPICO INSURANCE PLC

ASIA ASSET FINANCE PLC

ASIA CAPITAL PLC

B

BAIRAHA FARMS PLC

BALANGODA PLANTATIONS PLC

BIMPUTH FINANCE PLC

BLUE DIAMONDS JEWELLERY WORLDWIDE PLC

B P P L HOLDINGS PLC

BROWNS BEACH HOTELS PLC

BROWNS INVESTMENTS PLC

C

CARGO BOAT DEVELOPMENT COMPANY PLC

CENTRAL INDUSTRIES PLC

CEYLON COLD STORES PLC

CEYLON GRAIN ELEVATORS PLC Hot

CEYLON TEA BROKERS PLC

CEYLON TOBACCO COMPANY PLC

CHEVRON LUBRICANTS LANKA PLC

COLOMBO FORT LAND & BUILDING PLC

COMMERCIAL BANK OF CEYLON PLC

CITRUS LEISURE PLC Hot

COMMERCIAL CREDIT AND FINANCE PLC

D

DANKOTUWA PORCELAIN PLC

DFCC BANK PLC

DIALOG AXIATA PLC

DIALOG FINANCE PLC

DIPPED PRODUCTS PLC

DISTILLERIES COMPANY OF SRI LANKA PLC

DUNAMIS CAPITAL PLC

E

EAST WEST PROPERTIES PLC Hot

EASTERN MERCHANTS PLC

EXPOLANKA HOLDINGS PLC

E-CHANNELLING PLC

F

FIRST CAPITAL HOLDINGS PLC

G

GALADARI HOTELS (LANKA) PLC

GUARDIAN CAPITAL PARTNERS PLC

H

HATTON NATIONAL BANK PLC

HAYLEYS PLC

HAYLEYS FABRIC PLC

HAYLEYS FIBRE PLC Hot

HEMAS HOLDINGS PLC

HIKKADUWA BEACH RESORT PLC

HNB ASSURANCE PLC

HVA FOODS PLC

J

JANASHAKTHI INSURANCE COMPANY PLC

JOHN KEELLS HOLDINGS PLC Hot

JOHN KEELLS HOTELS PLC

L

LANKA ASHOK LEYLAND PLC

LANKA IOC PLC

LANKEM CEYLON PLC

LANKEM DEVELOPMENTS PLC

LAUGFS GAS PLC

LAUGFS POWER LIMITED

LOLC FINANCE PLC

LOLC HOLDINGS PLC

LUCKY LANKA MILK PROCESSING COMPANY PLC

M

MELSTACORP PLC

N

NATIONAL DEVELOPMENT BANK PLC

NATION LANKA FINANCE PLC

NESTLE LANKA PLC

O

ORIENT FINANCE PLC

OVERSEAS REALTY (CEYLON) PLC

P

PANASIAN POWER PLC

PEOPLE'S LEASING & FINANCE PLC

PIRAMAL GLASS CEYLON PLC

PRIME FINANCE PLC

R

RAIGAM WAYAMBA SALTERNS PLC

RENUKA AGRI FOODS PLC

RENUKA CAPITAL PLC

RENUKA HOLDINGS PLC

RICHARD PIERIS AND COMPANY PLC

RICHARD PIERIS EXPORTS PLC Hot

ROYAL CERAMICS PLC

S

SAMPATH BANK PLC

SEYLAN BANK PLC

SIERRA CABLES PLC

SINGHE HOSPITALS PLC Hot

SMB LEASING PLC

SOFTLOGIC HOLDINGS PLC

SOFTLOGIC LIFE INSURANCE PLC

SRI LANKA TELECOM PLC

SWISSTEK (CEYLON) PLC Hot

T

TEEJAY LANKA PLC

TESS AGRO PLC

THREE ACRE FARMS PLC

TOKYO CEMENT COMPANY (LANKA) PLC Hot

U

UNION BANK OF COLOMBO PLC

V

VALLIBEL FINANCE PLC

VALLIBEL ONE PLC Hot

VALLIBEL POWER ERATHNA PLC

W

WASKADUWA BEACH RESORT PLC


You are not connected. Please login or register

FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » AAIC Intrinsic Value

AAIC Intrinsic Value

Go to page : 1, 2  Next

Go down  Message [Page 1 of 2]

1AAIC Intrinsic Value Empty AAIC Intrinsic Value Thu Mar 14, 2013 11:24 am

lasithfernando


Stock Trader
Hey guys, I'm pretty new to the forum. This is my first post actually.

Just a query I have:

I read that 38% of Asian Alliance Insurance was bought by two foreign investment firms for an agreed price of 128 Rupees a share. Doesn't that mean that the stock's intrinsic value should be around that figure if not higher? And if so shouldn't the market price eventually reflect that value?

Your opinions would be highly appreciated

Cheers

2AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 11:38 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
good that you raised this question.

I am also thinking .....market price is 80/-. But this particular transaction happened @ 128/-. If it is 5-10% above market price , that I can understand.
.But over 50% ?
It sees unfair to allow this crossing. If the buyers buy from the market , the price will increase fro 80/- to 128/- and retailers will also benefit.
What is the practical meaning of this word - intrinsic value? If you can't sell at that value , then what's the point ?

3AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 11:42 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
The NSB-TFC deal of the Netherlands. Wonder what their taxpayers think? Razz

4AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 11:52 am

lasithfernando


Stock Trader
It could be that they have confidence in the company's earnings potential and the return they can make on their investment, so they're willing to pay a premium.

I've read about even Warren Buffet sometimes paying more than market value for certain stocks because his intrinsic value calculations told him they were worth more. Of course in his case the market value would sooner or later justify his purchase and increase to levels much higher than the prices he paid!

5AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 11:59 am

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@knockknobbler wrote:good that you raised this question.

I am also thinking .....market price is 80/-. But this particular transaction happened @ 128/-. If it is 5-10% above market price , that I can understand.
.But over 50% ?
It sees unfair to allow this crossing. If the buyers buy from the market , the price will increase fro 80/- to 128/- and retailers will also benefit.
What is the practical meaning of this word - intrinsic value? If you can't sell at that value , then what's the point ?

Just few Points to consider, the maximum the buyers can buy from the open Market it is 6 to 7% of the shares if am not mistaken.

Also One year or back SHL offered the Mandatory offer at 120, and i felt RICH used that wisely, the retailers could have offered their shares at that time. Also for the SHL the gain is approximately 5% after holding it for the 1 year, but i feel its better decision from SHL, as they can save the finance cost for certain extend.

This proposed transaction was announced in the last year dec, so i don't know why the retailers took the price from 80 to 88 on the transaction date?

Also i feel these two finance institutions provided basically a loan after securing the shares as security. IF am not mistaken DFCC some of the investment Portfolio also build up this way.

So they COULD have studied the long term value of the share before making the investment decisions, see the Profits made by the Asia Capital & RICH on the disposal

6AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 12:10 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
In seriousness, the acquisition of AAIC by Softlogic was based on the fact that they would get a lot of assets under management. Also life insurers collect funds from the public without needing to pay high interest rates.

They were warned early on that the investment income in the prior years were due to extraordinary gains. But they went on with the price of 120/= saying that the PE was between CINS and JINS.

However I would not take a long term bet with AAIC. There is better stuff around.

7AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 12:59 pm

salt

salt
Vice President - Equity Analytics
Vice President - Equity Analytics
SHL is hugely debt funded, they must be paying prime rates which is 13-14%.
I wonder it make any sense to sell down at 5% gain. May be liquidity situation is forcing them to do whatever to get rid of partly to raise liquidity

8AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 1:13 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Well when they got a price 50% above market and the interest rates they need to pay is high, this might be one of the few options they have.




@salt wrote:SHL is hugely debt funded, they must be paying prime rates which is 13-14%.
I wonder it make any sense to sell down at 5% gain. May be liquidity situation is forcing them to do whatever to get rid of partly to raise liquidity

9AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 1:20 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@Gaja wrote:
@knockknobbler wrote:good that you raised this question.


Just few Points to consider, the maximum the buyers can buy from the open Market it is 6 to 7% of the shares if am not mistaken.

Also One year or back SHL offered the Mandatory offer at 120, and i felt RICH used that wisely, the retailers could have offered their shares at that time.
...............
.........................

Thanks for the additional information.

As explained above SHL has offered 120/- ( mandatory offer ) about year back . Probably at that time market price would have been around that price. For that reason or for some other expectations some shareholders have not accepted the offered price and waited to sell at a higher price. Now the price has come down to around 80/-, It's OK, this happened to most of other shares as well.
However, now there is a buyer ( exactly , two ) willing to pay 128/- per share. But only SHL, being holder of 38%, got chance to sell at that price.

Based on the above, the basic issues .... ,I am suggesting for a discussion .. are;

1. The other share holders ,(probably some of them are small timers) didn't get the chance to offer at 128/- . Is that fair ?
2.Didn't the bigger shareholder got an undue advantage . Is that fair ?
3. Someone may point out this happened to in accordance with rules and regulations. Isn't rules are there to eliminate these undue advantages for particular class of share holders ?
3.The principles of market mechanism is to facilitate the meeting of buyers and sellers and allow the price to be decided on demand and supply . Has that happened here ?

10AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 1:27 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Well some retaialers could have sold this share between Rs 300-400.

After the take over this blew up sky high.

11AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 3:32 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@knockknobbler wrote:
@Gaja wrote:
@knockknobbler wrote:good that you raised this question.


Just few Points to consider, the maximum the buyers can buy from the open Market it is 6 to 7% of the shares if am not mistaken.

Also One year or back SHL offered the Mandatory offer at 120, and i felt RICH used that wisely, the retailers could have offered their shares at that time.
...............
.........................


Thanks for the additional information.

As explained above SHL has offered 120/- ( mandatory offer ) about year back . Probably at that time market price would have been around that price. For that reason or for some other expectations some shareholders have not accepted the offered price and waited to sell at a higher price. Now the price has come down to around 80/-, It's OK, this happened to most of other shares as well.
However, now there is a buyer ( exactly , two ) willing to pay 128/- per share. But only SHL, being holder of 38%, got chance to sell at that price.

Based on the above, the basic issues .... ,I am suggesting for a discussion .. are;

1. The other share holders ,(probably some of them are small timers) didn't get the chance to offer at 128/- . Is that fair ?
2.Didn't the bigger shareholder got an undue advantage . Is that fair ?
3. Someone may point out this happened to in accordance with rules and regulations. Isn't rules are there to eliminate these undue advantages for particular class of share holders ?
3.The principles of market mechanism is to facilitate the meeting of buyers and sellers and allow the price to be decided on demand and supply . Has that happened here ?

Good Points you have brought up.
If we look at the facts, SHL Group control approx 96 % of AAIC. They sold 19 % each to two seemingly unrelated parties (totally 38%) at a premium of over 50 % to the current retail price for minority interest. The issue here is weather the 2 parties who bought the share are unrelated, not acting in collusion for some other 3rd party who may takeover AAIC at a future opportune time. The Mandatory offer to balance 4 % of minority shareholders at Rs 128 was not triggered due to this 38 % sale to two unrelated parties not acting in concert. As regards the Price, it is hard to figure out the Intrinsic Value of AAIC due to volatility in earnings (full year EPS Rs. 1.90, 4th Q EPS Rs. 3.70). AAIC has sold this stake at approx just over 3 times Book Value (btw Book value of approx Rs 40 consists of 75 % or Rs 30 worth of NDB Shares). Generally a Premium is paid for large stakes irrespective of Intrinsic value, for factors such as Control, Board Representation, Synergy, Goodwill etc which is not apparent in this case. Minority shareholders consisting of approx 4-5 % of AAIC are widely dispersed and cannot expect to receive this Price Premium unless in the case of a mandatory offer. (They are the guys who have to worry about Intrinsic Value !).
Furthermore, a mandatory offer was made by SHL Group in Aug / Sep 2011 to buy up shares at Rs 120 from minority shareholders who further had a chance to exit at over Rs 300 in the market. So maybe fair enough for minority shareholders who are not getting this premium now due to this current transaction, unless of course it was deliberately structured in this way as to prevent a mandatory offer to the remaining 4-5 % minority shareholders.

12AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 3:37 pm

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@The Alchemist wrote: unless of course it was deliberately structured in this way as to prevent a mandatory offer to the remaining 4-5 % minority shareholders.

More likely it was structured that way to prevent Pathirage getting any bright ideas.
Just imagine the clueless suddhas do a mandatory offer expecting 4% to accept, then Pathirage files papers accepting for the 60% held by SHL (damn good deal for Pathirage to get out from a mistake).

13AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 4:11 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Look at the annual report issued. All of the above stuff are missing the most important part. This part makes all of the above talk look rubbish.

Don't think of assets or equity all the time. Also don't always look at the financial statements. Some other stuff are insightful. @ Alchemist & Jiggy lets see if you can find it.






14AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 4:31 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Jiggysaurus wrote:
@The Alchemist wrote: unless of course it was deliberately structured in this way as to prevent a mandatory offer to the remaining 4-5 % minority shareholders.

More likely it was structured that way to prevent Pathirage getting any bright ideas.
Just imagine the clueless suddhas do a mandatory offer expecting 4% to accept, then Pathirage files papers accepting for the 60% held by SHL (damn good deal for Pathirage to get out from a mistake).

Yes interesting point you bring up. But why would these chaps buy such a large (38%) stake at a seemingly handsome price of Rs 128 and with no apparent control features due to SHL retaining approx 57-58 % control. The Price paid seems way above any logical Intrinsic value calculation especially considering that 75 % of NAV of Rs 40 is in NDB shares- put another way - paying approx 10 times value for core Insurance Business assets. That's a hefty price to pay as Partners in Technical Assistance, Future development and Goodwill etc. So they must plan on taking over AAIC (or on behalf of some other 3rd party at a future date) or this deal seemingly makes little sense to DEG and FMO.

15AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 5:13 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@rainmaker wrote:Look at the annual report issued. All of the above stuff are missing the most important part. This part makes all of the above talk look rubbish.

Don't think of assets or equity all the time. Also don't always look at the financial statements. Some other stuff are insightful. @ Alchemist & Jiggy lets see if you can find it.

Sometimes, the Numbers do the talking so loudly that it drains out all the other fancy stuff that they say in their Annual Reports. If you are referring to the future Medical Insurance angle etc, pls take note the current reality that SHL is in a bit of a dodgy wicket. Their current liabilities exceed their current assets by approx Rs 4 Billion. There's approx Rs 23 Billion of Debt on their Balance sheet and their Cash Flow position is poor. They have over-leveraged themselves and they will have to de-leverage by selling assets, however way they sell it (tell it) to their shareholders in the Annual Report.

16AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 5:19 pm

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@rainmaker wrote:Look at the annual report issued. All of the above stuff are missing the most important part. This part makes all of the above talk look rubbish.

Don't think of assets or equity all the time. Also don't always look at the financial statements. Some other stuff are insightful. @ Alchemist & Jiggy lets see if you can find it.


The only insightful stuff as to why Pathirage would buy this is to use the Insurance float to invest/prop up his group companies and occasionaly invest in some debentures in his debt heavy hospitals.

Also he can cross sell using his group businesses. Buy a TV get insurance from AAIC, before going in for a surgery buy some Life insurance.

17AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 6:13 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@The Alchemist wrote:
@knockknobbler wrote:
@Gaja wrote:[quote="knockknobbler"

Thanks… for your thoughtful write up.
I wish to raise few points. For the sake of clarity , I’ll separate your passage. .
“If we look at the facts, SHL Group control approx 96 % of AAIC. They sold 19 % each to two seemingly unrelated parties (totally 38%) at a premium of over 50 % to the current retail price for minority interest. The issue here is weather the 2 parties who bought the share are unrelated, not acting in collusion for some other 3rd party who may takeover AAIC at a future opportune time. The Mandatory offer to balance 4 % of minority shareholders at Rs 128 was not triggered due to this 38 % sale to two unrelated parties not acting in concert.”
Agreed. I presume this arrangement conforms to existing rules /regulations .

“As regards the Price, it is hard to figure out the Intrinsic Value of AAIC due to volatility in earnings (full year EPS Rs. 1.90, 4th Q EPS Rs. 3.70). AAIC has sold this stake at approx just over 3 times Book Value (btw Book value of approx Rs 40 consists of 75 % or Rs 30 worth of NDB Shares). Generally a Premium is paid for large stakes irrespective of Intrinsic value, for factors such as Control, Board Representation, Synergy, Goodwill etc which is not apparent in this case”.
I am not familiar (or believe) in intrinsic value of a share. But I agree, in order to acquire a large stake a Buyer may be willing to pay premium price from the prevailing market value. That is entirely up to the buyer.

“Minority shareholders consisting of approx 4-5 % of AAIC are widely dispersed and cannot expect to receive this Price Premium unless in the case of a mandatory offer. (They are the guys who have to worry about Intrinsic Value !). “

This is the way things are happening now, and ….that ‘s what I am questioning . You are emphasizing minority shareholding is 4-5% . In this case that’ true. But even minority shareholding is 20-30% , this transaction can take place. That is, a share holder owning 38% can sell that @ 128/- ( to two parties who are willing to buy ) ,where as all other minority shareholders are stuck at 80-/. Though there are 2 buyers willing to buy @128/- , only one party got the opportunity to sell.
My question is ….is this fair ? Is this conforms to the principles of market mechanism ? (That is...... price is determined by supply and demand)
If this happens , then there are two tiers of market. All these EPS , NAV based valuations ,and also the intrinsic value calculations…. will go for a six !

Furthermore, a mandatory offer was made by SHL Group in Aug / Sep 2011 to buy up shares at Rs 120 from minority shareholders who further had a chance to exit at over Rs 300 in the market. So maybe fair enough for minority shareholders who are not getting this premium now due to this current transaction, ………

This is completely out of the issue at hand. What is the relevancy to the current issue …. that Minority share holders got an offer @ 120/- in the past or the prices went up to 300/- a year back ? I hope we are not trying to console minority shareholders !

18AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 7:24 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@knockknobbler wrote:
@The Alchemist wrote:
@knockknobbler wrote:
@Gaja wrote:[quote="knockknobbler"
“Minority shareholders consisting of approx 4-5 % of AAIC are widely dispersed and cannot expect to receive this Price Premium unless in the case of a mandatory offer. (They are the guys who have to worry about Intrinsic Value !). “

This is the way things are happening now, and ….that ‘s what I am questioning . You are emphasizing minority shareholding is 4-5% . In this case that’ true. But even minority shareholding is 20-30% , this transaction can take place. That is, a share holder owning 38% can sell that @ 128/- ( to two parties who are willing to buy ) ,where as all other minority shareholders are stuck at 80-/. Though there are 2 buyers willing to buy @128/- , only one party got the opportunity to sell.
My question is ….is this fair ? Is this conforms to the principles of market mechanism ? (That is...... price is determined by supply and demand)
If this happens , then there are two tiers of market. All these EPS , NAV based valuations ,and also the intrinsic value calculations…. will go for a six !


Yes it is fair. because say if you own 10 % out of the total minority interest of 20-30%, if there is a willing buyer (as in this case), you may get the premium price if your broker can negotiate with a willing buyer. The reason you are not getting the premium price is the minority interest % is widely dispersed among many shareholders and no one can offer a particular "block" to command a premium price. so, yes price is determined by supply and demand, the demand is there for say a 38 % block but since the minority interest collectively own only 4-5 % in a very fragmented holding in this AAIC case, they cannot supply the desired qty so they cannot get the premium price on offer.
Even in the case of say the minority's interest collectively owning 20-30% and if this holding is fragmented amongst many owners, no single shareholder can expect to command a premium price unless a mandatory offer is triggered. In fact that is why the 30% mandatory offer trigger rule is there to protect minority shareholders against abuse from controlling interest.
.

Furthermore, a mandatory offer was made by SHL Group in Aug / Sep 2011 to buy up shares at Rs 120 from minority shareholders who further had a chance to exit at over Rs 300 in the market. So maybe fair enough for minority shareholders who are not getting this premium now due to this current transaction, ………

This is completely out of the issue at hand. What is the relevancy to the current issue …. that Minority share holders got an offer @ 120/- in the past or the prices went up to 300/- a year back ? I hope we are not trying to console minority shareholders !

No i am not trying to console minority shareholders ! What i'm trying to say is, having got a opportunity to exit / sell earlier, the minority shareholders should not feel hard done by now, if a premium price (similar to what they may have been offered in the past) is now being paid by a strategic buyer for a substantial block, to their exclusion, simply because their 4-5 % collective stake is widely dispersed and fragmented and cannot command a premium (like SHL stake in AAIC can).





[/quote]

19AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 8:45 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@The Alchemist wrote:
@knockknobbler wrote:
@The Alchemist wrote:
@knockknobbler wrote:
@Gaja wrote:[quote="knockknobbler"
[color=green]
[color=red]
[/quote]

Accepted........, Your reasoning seems logical and sensible.
One thing I didn't realize is .... even at a particular level of demand/ supply equilibrium, the price may vary based on quantity demanded /supplied.

Thanks......, it's a pleasure to engage in a discussion at this level of vigour and intensity.

20AAIC Intrinsic Value Empty Re: AAIC Intrinsic Value Thu Mar 14, 2013 11:48 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@knockknobbler wrote:
@The Alchemist wrote:
@knockknobbler wrote:
@The Alchemist wrote:
@knockknobbler wrote:
@Gaja wrote:[quote="knockknobbler"
[color=green]
[color=red]

Accepted........, Your reasoning seems logical and sensible.
One thing I didn't realize is .... even at a particular level of demand/ supply equilibrium, the price may vary based on quantity demanded /supplied.

Thanks......, it's a pleasure to engage in a discussion at this level of vigour and intensity. [/quote]

Friend for general transactions the price is decided by the demand & supply, but as a minority shareholder if u have a considerable block minority shareholders also can sell his or her stake at premium, if am not mistaken Mr. R.F.T. Perera sold his stake in Glass to EPF last April.

Also do u thing the major shareholder will sell 38% stake, if the minority shareholders have more than 13%, unless the major shareholder wanted to get out from the company, i don't think he will do that

Sponsored content


Back to top  Message [Page 1 of 2]

Go to page : 1, 2  Next

Permissions in this forum:
You cannot reply to topics in this forum