EDMI

[dydx]

I have just finished reviewing the FY10 (ended 31Dec10) full-year results announcement (first released on 25Feb11).....
http://info.sgx.com/webcoranncatth.nsf/V...200341F35/$file/2010_FY_Announcement.pdf?openelement [FY10 results announcement]
, and I am indeed impressed by the continued solid yoy growth in EDMI's business volume, revenue and profits in FY10 - the 3rd consecutive year in a row (since FY07) that revenue, PBT and EPS have recorded healthy yoy increases.

A Final dividend of $0.0075/share (vs. $0.015/share for FY09) has been declared. Having had 2 acquisitions (in Australia and PRC) and also spent some $2.8m on capex for expansion of production capacity in Malaysia in FY10, EDMI understandably is trying to preserve cash to support the increased working capital of an enlarged business.

For those who have not yet heard or read about EDMI and its promising electronic revenue meters business, you could visit the company's website and review the latest FY09 AR.....
http://www.edmi-meters.com/About_EDMILtd.aspx
http://info.sgx.com/listprosp.nsf/07aed3...5000de6fc/$FILE/EDMI%20Limited%20AR09.pdf [FY09 AR]

Based on the last done share price of $0.295 and the 214.025m issued shares (as at 31Dec10), Mr Market is now giving EDMI a current market cap. of only $63.14m. When compared with EDMI's FY10 fully-diluted EPS of $0.0444, and 31Dec10 equity position of $61.345m, Mr Market is now attaching a historical PER of 6.64x, and a Price-to-Book (or BV) ratio of 1.03x, to EDMI. This does seem too low for a technology product company that is enjoying healthy growth in business volume and profits!

I suppose this is probably the main reason behind controlling shareholder SMB United's recent decision to raise its stake in EDMI by adding 2,631 lots at $0.29/share on 10Mar10.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument

[dydx]

Both EDMI and parent SMB United have requested for trading halt this morning (25Mar11), pending the release of a likely important announcement. I see 2 possibilities -

(1). SMB United privatizing EDMI by way of a GO to minority shareholders at a premium over the last done share price of $0.32 (24Mar11).

(2). SMB United selling its controlling stake in EDMI to a 3rd party at a likely substantial premium over the last done share price, which will also lead to a GO at the same price.

Between the above, my wish is obviously (2). Or am I just dreaming?

[Musicwhiz]

Both EDMI and parent SMB United have requested for trading halt this morning (25Mar11), pending the release of a likely important announcement. I see 2 possibilities -

(1). SMB United privatizing EDMI by way of a GO to minority shareholders at a premium over the last done share price of $0.32 (24Mar11).

(2). SMB United selling its controlling stake in EDMI to a 3rd party at a likely substantial premium over the last done share price, which will also lead to a GO at the same price.

Between the above, my wish is obviously (2). Or am I just dreaming?

Haha, then let me congratulate you in advance then! You have been right on many occasions regarding GO, and you have been through quite a few GO as a shareholder I believe. So far, none of my companies has undergone a GO at a substantial premium to last traded price. I do firmly believe that with patience and time, this will happen some time in the future.

In the meantime, thanks for your advice and guidance on companies. It's been most enlightening!

[Musicwhiz]

The Board of Directors of SMB United Limited (the "Company") is pleased to announce that the Company had on 25 March 2011 completed the off-market transfer of 127,920,535 shares in the Company's indirect subsidiary, EDMI Limited ("EDMI"), representing approximately 59.77% of shares in EDMI from the Company's wholly-owned subsidiary, Bridex Singapore Pte Ltd to the Company (the "Internal Transfer"). Following the Internal Transfer, the Company now holds approximately 59.77% interest in EDMI directly rather than indirectly, and EDMI shall become a directly owned 59.77% subsidiary of the Company.

The consideration for the Internal Transfer is at cost, and was arrived at on a willing-buyer willing-seller basis.

The Internal Transfer is funded through internal resources and is not expected to have any material effect on the consolidated net tangible assets and earnings per share of the Company and its subsidiaries for the current financial year.

None of the directors or substantial shareholders of the Company has any interest, direct or indirect, in the Internal Transfer.

By Order of the Board
Lee Phuan Weng
Chairman
28 March 2011

---

EDMI GO at 36.5 cents. Good one for you dydx.

[dydx]

Parent SMB United - now having only a 59.77% controlling interest in EDMI - has Just today (28Mar11) made a GO at $0.365/share for the remaining shares with a view to privatize EDMI.....
http://info.sgx.com/webcoranncatth.nsf/V...10011EAF7/$file/Joint_Announcement.pdf?openelement

SMB United is being advised by CIMB Bank, and EDMI's IDs will soon have to appoint an acceptable IFA to evaluate the fairness of the GO and give an independent advice to the IDs.

Fundamentally, the GO at $0.365/share is not adequate as it is way-off the intrinsic value of each EDMI share, and frankly, unless the offer is revised upwards to a more fair and acceptable level, I really don't see how SMB United can get what it wants.

I suppose existing EDMI shareholders should just hold on to their shares, get the coming $0.0075/share Final dividend for FY10, and wait for the IFA's opinion and IDs' recommendation.

[lonewolf]

I will be be very surprised if the IFA and ID sing a different tune to the 'music sheet' that SMB has prepared for the GO of EDMI.

Of the tens of GOs of the various companies, I can only remember a handful where the IFA and ID come outright and say the offer was prejudice to the interest of the minority shareholder and recommend not accepting the offer.

The usual songs goes something like this:

1) Minority investor should take this as an opportunity to cash out of their investment at a premium to the VWAP.
2) Low trading volume of the share makes it difficult for investors to cash out of their investment.
3) Investor should reject the offer if they believe in the long term prospect of the company.

As those accepting the offer are not entitled to the $0.0075 final dividend, the actual offer is in fact $0.3575

(Not vested)

[dydx]

3) Investor should reject the offer if they believe in the long term prospect of the company.

This is exactly right, unless, of course, if the offer is a fair one, when compared with EDMI's intrinsic value. I tend to believe most existing EDMI shareholders belong to this category.

This is also exactly the main reason and motivation behind parent SMB United's decision wanting to privatize EDMI.

As at 3:45 p.m., existing shareholders of 3,441 lots have sold their shares at $0.36 apiece to long queues of waiting buyers at $0.36, $0.355, and $0.35. It will be interesting to understand why suddenly so many want to buy EDMI? It can't be just for arbitraging, as a $0.005 price difference is not enough to cover the brokerage and the expected waiting time of 2 to 3 months for the entire GO process to complete.

One thing is certain though, those who have sold their shares will have forgone the chance of any upward revision of the offer price, plus the $0.0075/share dividend payment (XD: 19May11; payment date: 3Jun11).

[lonewolf]

One thing is certain though, those who have sold their shares will have forgone the chance of any upward revision of the offer price, plus the $0.0075/share dividend payment (XD: 19May11; payment date: 3Jun11).

I dun think its gonna happen. It was stated in the announcement 'The Offeror does not intend to revise the Exit Offer Price under any circumstances.'.

And something else caught my eyes: The Exit Offer will not be conditional upon a minimum number of acceptances being received.

The two fact add together tells me that SMB is not particularly serious about the delisting and is just trying its luck and see if any goondu minority would bite. Some might - for one reason or another.

[dydx]

No listed company will enter an open-market ring for an acquisition battle with only one-single plan; there should be at least Plan A, Plan B, Plan C, and may be a Plan D.

No listed parent will make a well-conceived GO with the view to privatize a listed subsidiary or associate, and be happy or satisfied if at the end the exercise only managed to add a few percentages in shareholding.

In this case, SMB United will have to appoint and pay for an advisor bank (CIMB), a lawyer (who?), and the costs of producing a circular and having an EGM, in order to make the GO. And in response, EDMI will have to appoint and pay for an IFA, a lawyer, and the costs of producing a circular and having an EGM. I shall leave it to fellow forumers to make your own estimate or a guess on the total costs of such an exercise and the time/effort from the 2 management teams and BODs.

The local M&A rules provide that for the benefit/interest of the minority shareholders, the listed acquiree (EDMI) must appoint an IFA to give an independent opinion on the offer and based on which, the IDs must then make their recommendations to the minority shareholders. At the end of the day, the shareholders themselves must decide whether to part with their shares, either through a sale in the open-market, or accepting the GO later.

While it is still too early to predict the final outcome of this battle, towards the end a scenario may emerge that a few large minority shareholders with a combined block of shares of >10% would manage to get SMB United to agree to raise the GO price in exchange for crossing the crucial 90% mark for a absolute privatization mandate. In such an event, those who have chosen to sell their EDMI shares in the open-market before that will lose the extra.

If the 8.936m shares - equivalent to 4.17% of EDMI's latest 214.025m issued shares - transacted today were mainly bought by smart investors attempting to form a 'blocking force' of a >10% interest, I believe we may just have a chance to witness some interesting events/outcomes in the next 2 to 3 months.

[dydx]

The big buyer today is none other than SMB United itself.....
http://info.sgx.com/webcoranncatth.nsf/V...10044CBDE/$file/Dealings_Announcement_2803.pdf?openelement

SMB United's purchase of 8.691m shares at $0.36/share today amounted to 97.26% of the total 8.936m shares transacted. Including today's purchase, and other purchases of directors' personal shareholdings, SMB United now has 66.54% of EDMI. The ferocious purchase today simply means SMB United has activated Plan A (formal offer), Plan B (buying from concerted parties), and Plan C (buying from the open-market) concurrently. Isn't this clear enough SMB United wants to privatize EDMI very badly?

Now that SMB United has shown its hand, I guess there is no reason why the remaining informed minority shareholders should still want to sell their shares into the open-market from tomorrow onwards.

SMB United should know very well that to cross the crucial 90% mark will not be easy. If the remaining shareholders stand firm and refuse to sell, SMB United will have to consider raising the offer price at some point.