This article was recently published on www.nracapital.com and is reproduced with permission


Synear Food Holdings - a former high flying S chip receives delisting offer from its major shareholder at $0.186 cents........very disappointing but let's see what the IFA says !!

Synear Food (SF) was once a market darling with its IPO in 2006 at $0.54 and rising to a high of more than S$2.00 on the way there, SF also placed 175mn shares at $1.85.  The chart below shows its rise to fame and its subsequent collapse.

synear_chart10.12
Chart: Bloomberg

 

Investors should read the delisting offer document and wait for SF's IFA to give its opinion on the offer to.

On the surface the offer looks very unattractive.  The NAV of SF as at 30 June 2012 (its half year 2012 results announcement) was RMB2.31 or about S$0.45.  The net cash in SF as at the end of June 2012 was RMB577.6mn or about S$113mn or about S$8.2 cents per share.

In terms of earnings, SF reported full year 2011 net profit of RMB6.5mn but at the nine months to Sept 2011, its nine month net profit was RMB61.2mn. 

The six month 2012 net profit figure was RMB39.2mn. 

For the full year FY2011, SF generated about RMB277mn in cashflow while for the six months to June 30, 2012, it generated about RMB98mn in gross cashflow and RMB60.8mn in net cashflow. 

We can't predict what the earnings and cashflow will be but just based on the figures for FY2011 and the six months to June 2012, it would not be unreasonable to expect that SF can generate about RMB200mn in gross cashflow a year. 

A DCF of this cashflow at 10-12% discount rate would yield RMB2.1bn or about S$402mn or about S$0.29 per share.

 If we add the cash per share of 8.2 cents to this - we are looking at a theoretical fair value of S$0.37 per shares.  This is almost a 100% higher than the exit offer price.

Based on these preliminary calculations, the offer price in my opinion significantly undervalues the business. 

It would therefore be interesting to read the IFA opinion of what it thinks of the exit offer too.


Synear Food is hotly discussed in our forum. Click here

Recent article: Kevin Scully: "Accumulate MIDAS at S$0.40 level and below for earnings recovery in 2013"


Comments  

0 #1 Max 2012-10-18 05:49
So what will happen here, if the offer takes place, if the shareholder bought shares at average price above S$0.186?
Quote

Share Prices

Counter NameLastChange
AEM Holdings3.840-0.010
Avi-Tech Electronics0.275-
Best World1.760-0.020
Broadway Ind0.118-
China Sunsine0.405-
DISA0.003-
Food Empire0.650-0.010
Fortress Minerals0.330-
Geo Energy Res0.3750.010
Golden Energy0.7800.005
GSS Energy0.046-
InnoTek0.470-
ISDN Holdings0.405-
ISOTeam0.100-
IX Biopharma0.126-
Jiutian Chemical0.0780.001
KSH Holdings0.3500.005
Leader Env0.056-0.002
Medtecs Intl0.140-0.002
Meta Health0.025-0.001
Nordic Group0.4800.005
Oxley Holdings0.149-
REX International0.235-
Riverstone0.635-0.010
Sinostar PEC0.170-
Southern Alliance Mining0.380-0.060
Straco Corp.0.405-
Sunpower Group0.260-
The Trendlines0.088-
Totm Technologies0.105-0.002
UG Healthcare0.195-
Uni-Asia Group0.830-0.005
Wilmar Intl4.1200.020
Yangzijiang Shipbldg1.4200.020

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1149 guests and no members online