Facts to consider:
Number of shares in issue will be increased by 50 %.
Asset Val per share was 3.28. new asset val will be Rs. 2.10.
Earning per share will also go down at the same rate.
last Year EPS was 0.75 . It will be adjusted to 0.50 .
If you buy 2000 @ 10/- you cannot sell 3000 @ 10/- after bonus.
You can't say if anybody buys it now for Rs10.70 and he wont be able to sell the share at the same price. But who knows (now the VLL has entered in oversease business - Hydro power in Cambodia first time by a sri lankan company)If they produce better results some times you may be able to sell your shares even above Rs10.70. in future.
Same thing happened to SDB as well. Before the Scrip issue - same as capitalization - it was trading around Rs155 and immediately after the issue it came down to Rs139 levels and withing a month/ 2 months now trading at Rs170 levels after touching Rs175.
Hence it is not correct to say share price will come down every time after a issue. If the company is performing well nothing to worry.
VLL is a very good investment right now.
* If you purchase 100,000 shares @Rs10.70 your investment cost will be Rs1,070,000(with our brokerage).
* Issue is 1 share for every 2 held.
*You will get 50,000 shares from the company free of charge.
*Now your investment cost will be Rs1,070,000. But
you have 150,000 shares with you.Hence cost per share is Rs7.133 - Down from Rs10.70.
*After the issue NAV will be Rs2.20 and the annualized EPS will be Rs0.67 cents.
*If you take VPEL. Its NAV stands at Rs3.12 and annualized EPS is Rs1.0. Its a differance of Rs0.33 cents.
*If you compare the growth rate of VPEL and VLL for the June Q(1st quarter) you can clearly see the speed of growth of VLL.
*Revenue growth = VLL is - 32.7% & VPEL is only 17%
*Net profit growth = VLL is - 186.6% & VPEL is only 21%
*EPS growth = VLL is staggering 212.5% & VPEL is only 25%
*Hence it is very clear that the growth speed of VLL is better than VPEL.
*Taking all these factors in to consideration my target price after the capitalization of VLL is around Rs7.50 - Rs8.50.range.
*Further I strongly believe immediately before the issue VLL may touch even Rs12 levels provided the superior growth displayed by the company in first Q.
*Conclusion - VLL is a good investment @ current mkt price of Rs10.70.