New Toyo

[potatolover]

If someone wants to buy over New Toyo, what would be the likely valuation.
The following is my workings:-

Core Business = $16mil/440mil share = 36 cents per shares (at P/E of 10 times - conservative? Will the buyer include a premium of say 20 to 30% on top of the P/E 10 fair valuation?)
All properties sold off = 6 = 6 cents (based on most conservative estimate of PSF)
Special dividend from SAH sales proceed = 13 cents

How much of the full 13 cents will actually be paid out?
How much will be used to pare down debt?

All in price = 55 cents
Current share price = 25 cents (19 Jan 2012, 9.40am)

For comments pls ?

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[portuser]

Shanghai Asia Holdings (SAH) is getting closer to selling its operating assets and becoming an all-cash company, according to its filing with SGX on 18 Jan 2012.
The company's plan to sell all its operating assets, unveiled in Oct 2010, was criticised by shareholders for not getting a good price for its lucrative and promising aluminium foil business. The intention of keeping half of the sales proceeds for investing in new businesses was also viewed as unwise, ill-conceived, and fraught with risks.
The recent (18 Jan 2012) announcement is silent on investing in new businesses. Has the Board of SAH heeded shareholders' concern and is reviewing its original plan?
When the sales finally materialise, SAH will end up having around $175m in cash, or 19.5c per share.

New Toyo has a 34% stake in SAH. A full payout by SAH will result in New Toyo receiving $58m. New Toyo is in a position to dish out the bulk as a special dividend even though its borrowings, at first glance, appear high. Of the $81m owed by New Toyo Group as at 30 Sep 2011, $51m belonged to Tien Wah. Tien Wah has bought enough printing machines to cope with requirements imposed by BAT, and no major asset acquisition seems likely. Its 's strong cash flow from printing business can comfortably pare down the loans. The remaining $30m owed by New Toyo itself is mainly recurring working capital loans which are also being pared down from cash flow from lamination business.

A full payout by New Toyo will translate into a 13c special dividend. Even if it retires the entire $30m loans, New Toyo can still dish out generous special dividend of 6c.

[potatolover]

If New Toyo and Tien Wah can also generate sufficient cashflow from its exisiting businesses as well as the rationalization of investment properties, there is no need to tap onto the special dividend from SAH to reduce its debt.

Moreover, paring down its debt "too quickly" would probably upset the relationship with its bankers ....

Then the key question to ask on the rationalization of investment properties is how onerous and costly is it for New Toyo and Tien Wah to sell off the unnecessary properties and consolidate its core operations?

[potatolover]

The max cash one can get back from SAH is 19 to 19.5 cents per share ... So the upside is limited. In fact, what investors should do is to liquidate SAH and switch over to New Toyo to capitalize on it's upside potential ...

[potatolover]

Hi Port User

Could you provide an assessment of on the rationalization of investment properties and how onerous and costly is it for New Toyo and Tien Wah to sell off the unnecessary properties and consolidate its core operations?

Thank you very much.

[Underdogger]

"Core Business = $16mil/440mil share = 36 cents per shares (at P/E of 10 times - conservative? Will the buyer include a premium of say 20 to 30% on top of the P/E 10 fair valuation?)"

How is $16mil derived? What assumptions about Tien Wah's earning potential have been made?

[Underdogger]

Someone just bought SAH at 18.5 cents. Does this person know that the max payout avaliable from SAH sales proceed is only about 19 cents. And 19 cents will continually get eroded as CEO's and other admin costs are being paid out from the 19 cents.

Does not seem to make logical sense to buy at 18.5 cents....

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[cif5000]

I expect a dividend to be declared for FY11.

[Underdogger]

Hi Cif5000

Which counter are you referring to? SAH or New Toyo..

SAH - max possible payout is around 19cents if company decides to pay out in one lump sum.

New Toyo - After SAH pays out its special dividend of 19 cents, New Toyo may in turn pay out a hefty special dividend of 13 cents (based on its % ownership of SAH) on top of its own regular dividend of abt 2 cents per annum.

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[cif5000]

SAH - max possible payout is around 19cents if company decides to pay out in one lump sum.

I deduced that the subsidiaries of SAH have dividends payable to SAH, and that amount should be added to the proceeds. However, I could be wrong because SWP is entitled "any increase in NTA" during the transition period. The grey area is where there is no mention of whether dividend can indeed be paid from the subs to SAH.