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Hard to speculate - maybe they do also feel that the offer is too low? And no point buying since it might be too quick a commitment of capital.
Just my opinion but I am thinking Boer might be testing luck with a cheap offer of 0.32 first and betting on the fact that SMB counter has been illiquid. There can be a potential for a better offer and at 20.57%, it does provide a bit of an incentive for Boer to up their offer and also a bit of a worrying for SMB management.
I'm hoping for at least 40c (though I have sold a partial of my SMB position)
*vested*
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the offer must at least match the market price of $0.36
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SMB Board has characterised the 32c offer by Boer as grossly insufficient for it does not recognise the potential of smart metering business. If the Board's assessments are fair, then the 38c target (just 20% higher than the 32c offer price) cannot qualify as being reasonable.
In Q2 and Q3, SMB's group profit was around $7m each, and profit from smart metering is set to grow as concern over global warming will drive demand for smart mertering systems.
Eps will be more than 5c for an annualised profit of $28m, and the theoretical price wil be 55c for a PER of 11.
If the third party is an existing smart metering company, it should be willing to pay more for SMB's strong market recognition in the UK.
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There are indications that smart metering business is growing well even before smart meters are installed in UK homes.
First, EDMI raked in an operating profit of $15m in the first 9 months of 2011, against $9m in the corresponding period last year.
Second, during the first 9 months, EDMI sales rose strongly from $67m in 2010 to $101m in 2011.
Third, SMB has been building up its inventories, mainly to support rising business vol of EDMI:
End of
31 Dec 2010 $ 50m
31 Mar 2011 $ 61m
30 June 2011 $ 70m
30 Sep 2011 $ 69m.
It seems that the smart metering industry is consolidating. Email, a significant player, was acquired by Landiss & Gyr, which in turn was taken over by Toshiba subsequently.
One theory is that EDMI's competitive advantage may be short-lived because smart metering system is not rocket science. If bigger players decide to endure the long-drawn process of applyinging accreditation's in EDMI's territories, EDMI may be under threat. On the other hand, the big players may find taking over EDMI a shortcut to access to these territories.
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A cut in government's budget may not necessary lead to automatic delay in the roll out of smart meters as it could be seen as an investment in infrastructure and being energy efficient (cost savings and being green).
Further, it is not clear whether government pays the bill of smart meter roll out. Electricty retailers (which are usually commercial entities in other countries) are the biggest beneficiaries of implementation of smart meters (no need for manual meter readings and maintaining staff to handle disputes in billing) and should logically foot the bill.
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dzwm87,
Base on my understanding, in the electricity market, there are usually 3 players. The power generator, the grid operator and the wholesaler/retailer of electricity. When you say utilities company, can I ask which of the 3 you are referring to? Thanks!