Friday, January 18, 2013

China VTM privatisation delayed

China VTM (HK:893) is currently subject to a proposed privatisation offer (by way of a scheme of arrangement) from it's controlling shareholder. The offer price is HK$1.93 per share. While this represents a decent premium to the prices at which the shares were traded before the offer was announced, to my mind it still undervalues the cash rich company. To make matters worse, the offer timetable has been pushed back and we will not see the offer being officially made until April which means that the proceeds of the offer won't be available until sometime after that (possibly late May or June). No reason for the delay has been given. To be quite frank, this is a pointless irritation.

Given that most of the buyers are purchasing shares for arbitrage purposes, it was no surprise to see a couple of cents trimmed off the share price to reflect the delay. I will still wait for the offer to go through rather than sell into the market but am tempted to pick up a few more. Net of costs, I would make about 6% if I purchased at current prices (HKD1.81) and the scheme is approved. Of course, there is the risk that the scheme will not be approved in which case I would expect the share price to fall significantly.

Probably best to do nothing?

8 comments:

Anonymous said...

But considering the price of iron ore now with the the time when the offer is announced, iron ore price had improved significantly.

Should no offer been made, perhaps the price of china vtm might be better than last traded price of HK$1.81....

It is ipo at more than HK$3 and it iron ore resources had increased few times compared to that day...

I had the same thought as you and I brought 100 lots at HK$1.81 recently.......considering getting more and no matter if it is delisted or not, I think it is a good bet. Not to mention china will release policy to improve economy and increase the demand of steel and iron ore.....

traineeinvestor said...

At 1.93, I think the offer is too low given the outlook for the company and its cash position. That said, there is a lot of new iron ore supply coming on stream and the possibility of lower iron ore prices at some time in the future cannot be ruled out.

The delay is irritating given that the company will not be paying a dividend which we would otherwise expect ahead of the scheme of arrangement being executed.

Unfortunately, it is a scheme so if it passes we all lose our shares. Even so, I am tempted to cast a symbolic "no" vote against the scheme subject to market conditions and my personal position at the time.

Cheers
traineeinvestor

Anonymous said...

Yes, I think the offer of HK$1.93 is too low too....

The assets of the company had increased from 133mt to more than 400mt currently and 600mt later....

It is ipoed at more than HK$3 and with iron ore price at a high now, the share price should worth a lot more.

I think it is hard for them to get more than 90% as they currently only had around 50%....as such, the privatisation exercise might not get through....

I think it is worth at least HK$2.5

traineeinvestor said...

@2.50, I would be a very happy seller. Unfortunately, I do not see the offer being raised again.

Anonymous said...

The deal might not get through....and it will be good for us, retail investors....

Should go above $2 after some time if the deal is not through....iron ore price is increasing lately....

Jason wee said...

Price weakness now....likely due to decrease in profit.........

traineeinvestor said...

And there will not be a dividend either - it's one of the terms of the privatisation offer.

That said, the iron ore price has been rising recently.

Anonymous said...

Hope delist offer does not get through......

It is worth at least $3....at least more than it IPO price of HK$3.3 if I recall correctly...It assets is few times more as compared to that time.........