SMB United -- takeover bid by Boer

[dzwm87]

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*

[cif5000]

A third party is interested in SMB as well.
http://info.sgx.com/webcoranncatth.nsf/V...C0038D71E/$file/Expression_of_Interest.pdf?openelement

Will they make an offer?
At what price?
Will Boer counter offer?
Will insiders support the offer(s)?

Anyway, the stock should not be trading at 0.31/0.315.

[dzwm87]

Wow, trading counter is at 0.34 today. Really hope Boer can at least up their offer.

Looking at T12M earnings of 4cents & applying a 11x P/E (based on Schneider's current valuation), I think I can settle for around $0.40

But realistically speaking, I'm not sure if the 3rd party offer will be that high - suspecting might be around $0.38 instead

Exciting! Hopefully, those vested are down for a new year surprise (pleasant)..

*vested*

[cif5000]

the offer must at least match the market price of $0.36

[portuser]

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.

[dzwm87]

Portuser, your projection, though theoretically correct, is too optimistic.

Yes, smart metering business is growing but the major driver for sales is fron the Europe zone. With the current outlook, it is anything but optimism. When there is a fiscal drag, what will be the first few to be cut off from the budget? Smart metering expansion could be one of them.

And at your valuation, I doubt any company will, at this current period, offer such an agressive level. Don't forget, the 3rd party deal is solicited by lazard. Hence, it is the seller looking for the buyer. I believe the approached buyer will want to price in some margin of safety given today global condition.

But above everything, if it is a 55c offer, of course I will be happy!

*vested*

[portuser]

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.

[Sfsh12]

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.

[dzwm87]

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.

The euro-wide roll out is most likely going to happen but what is improbable is the likelihood of it happening soon. Two possibility is whether will the roll out is spread across more years or will it be executed in later years. These were what EDMI MD & CFO mentioned during the last EGM on its PSP proposal.

Utilities company pay the bill for the smart meter, if I remember correctly.

[Sfsh12]

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!