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Hi MW,
That I agreed. Berkshire Hathaway is a good example.
Maybe they will also use the cash for the shares buyback which is also waiting to be passed at the SGM. Hopefully it can generate the effect like we see at Olam.
Thank you for your reply.
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(11-07-2012, 10:49 AM)yeokiwi Wrote:
From wikipedia...
Definition of 'Authorized Share Capital'
The number of stock units that a publicly traded company can issue as stated in its articles of incorporation, or as agreed upon by shareholder vote. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the company.
Also be called "authorized stock," "authorized shares" or "authorized capital stock."
Read more: http://www.investopedia.com/terms/a/auth...z20HIMsFC2
Biosensors has around 1.7billion shares issued currently.
Without the shareholders' approval, Biosensors can only issue another 2.4-1.7 = 0.7billion shares more to whoever.
With the approval, Biosensors can issue 0.7 +2.4 = 3.1 billion shares.
=> Company likely to issue new shares to get more money to run its business.
In the process, the current shareholders' stake in the company will be diluted if the new shares are issued at lower than current market price(which is most likely the case).
Or maybe a right issue for every shareholder..
Or maybe issue more share with scrip dividend scheme
Or maybe issue more share with exercising of warrants
Just to add few more....
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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the company could also be planning to do an acquisition by cash+share
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Has Biosensors overpaid for its acquisition of JW Medical Systems Ltd (JWMS)?
Out of the $268M of total identifiable net assets in JWMS, only $112m are tangible assets such as PPE and Cash! $156M are intangible assets with approx. $19M attributed to patents and $135M attributed to customer relationships. Are customer relationships worth so much?!
With total consideration transferred (cash+share) being $478M for the remaining 50% of JWMS, Biosensors has paid a premium price of 3.56x Net Asset Value ($478M/$134M), and a premium price of 8.53x Net Tangible Asset Value ($478M/$56M).
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Everything looks good on this one until i discover a staggering $622M goodwill and $156M intangible asset on the book, and only $44M property, plant and equipment.
"Going forward, amortisation for customer lists and patents will amount to US$4m/qtr for the next 10 years. This works out to a recurring non-cash charge of US$16m per annum." - DBS Group Research
Not sure how they count but for $622M goodwill to amortize in 10 years shouldn't it supposed to be $62M per year? This company only earn $33M for the latest quarter.
This goodwill is really freaking but most analysts still recommend this stock. Should we just close 1 eye on this, and really no big deal? I cannot imagine if the company will have to write off the goodwill it going to cost the company 2 years of revenue or 6 years of profit.
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06-09-2012, 09:30 PM
(This post was last modified: 06-09-2012, 09:44 PM by d.o.g..)
(06-09-2012, 09:02 PM)hongonn Wrote: Not sure how they count but for $622M goodwill to amortize in 10 years shouldn't it supposed to be $62M per year? This company only earn $33M for the latest quarter.
Under the current accounting rules, goodwill is NOT amortized, but tested annually for impairment. If it is deemed to be impaired, it is written down to the new value immediately. So if JWMS performs as expected the $622m of goodwill will be on the balance sheet forever. If JWMS later turns out to be a dud, there will be a big-bath writedown in that quarter.
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That is a bit scary especially JWMS comes from China. I can't even find a website of its own, which is worth almost $800M?
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(06-09-2012, 10:15 PM)hongonn Wrote: That is a bit scary especially JWMS comes from China. I can't even find a website of its own, which is worth almost $800M?
JWMS was a unit of Shandong Weigao (1066 HK). Weigao sold JWMS to Biosensors in exchange for shares in Biosensors.
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