Forum Archive Index - April 2001

["SWLEE" <SWLEE@xtra.co.nz>]

Hi John,

My suggestion is that for those who believe that there is a future in FFS shares, the best option is sell them all now and convert the proceed into RBC shares NOW!. The simple calculation below show why:-

 

In a nutshell, RBC is a company full of assets and hardly any liability. At the onset of the FCL separation, they were inherited with cash and assets:

    1) Their cash came from $34M from the sale of NZ Refining Company share holding and $183M from the sale a portion of their Capstone shareholding.

 

    2) They still own some capstone shares valued at $75M (based on US$28/share @US0.445 conversion rate)

which cannot be sold until Sept 2001.

 

As part of the seperation arrangement, RBC is converting 1 and 2 above into:

A) Buying Challenge Stations & associated assets from Shell for $20M.

B) RBC will pay or have paid FFS $80M for South American forestry and biotech intellectual property

C) RBC paid $0.25/share for 267M of FFPS shares, ie $67M (you noticed last week there was bleep in the share price !!!)

D) RBC will have to buy from FCL Forest 225M of (75M FFS & 150M FFPS) shares at $0.40/share a total of $90M. (This transaction is yet to be reported in the future. So don't get excited if suddenly in a single day the price goes up to $0.4 on the market; you would know why then)

 

 

RBC will own a total of 267+225= 492M FFS/FFPS shares at a total price of 67+90=$157M, therefore an average price of (67+90)/492 ie approx. $0.32 per share.

 

RBC has a total of 353.2M shares on issue. At today's market price of $0.43/share, RBC is only valued at 353.2*0.43=$151.8M

 

For every cent rise in FFS/FFPS share, it would add 492/353.2=1.39 cents to RBC share. Conversely, for every cent fall in FFS/FFPS share, it should reduce RBC share by 1.39 cents.

 

As at today's price, RBC is valued at ($151.8M) less than the total value of the FFS/FFPS shares currently owned by RBC!!!, notwithstanding the fact they own another $100M of assets from A and B above.

 

 

With all these figures, it should provoke two interesting school of thoughts:-

i) Either RBC is currently grossly undervalued by the market, even though if one assumes that the current share price of FFS/FFPS  being fair value, and because there must be some "residue" value from assets A & B above. (Perhaps, that's why AMP is buying RBC for the free asset of A & B above)

 

ii) Or, RBC current price is fair value, the share price of FFS/FFPS will have to drop in the short term at least, to reflect certain "residue" value of assets of A & B above. For example, if assets of A & B is discounted by say 50% to $50M, at current RBC share price, it would value the combined FFS/PPFS share price of ($151.8-$50)/492=$0.207!!!! 

 

 IMHO, the current share price of FFS/FFPS does not stack up at all. As stated above,  RBC is paying an average price of $0.32 for the combined 492M FFS/FFPS shares.  Strangely enough, this price "coincided" with the share price of FFS/PPFS the day after the right issue, as opposed to $0.25 prior to the right issue. This tend to support the argument that  FFS/FFPS share price was "artificially" jacked up so that RBC is seen to be paying the right price for their holdings. It would be interesting to see where FFS/FFPS share price would head, post transaction on event D above.

 

For my money,  RBC would be a better horse to bet on !!!!

 

Disclaimer: The above is a personal opinion and is provided as a food for thought, agree or disagree at your own responsibility!!!

 

 

----- Original Message -----

From: John and Beth Schwartfeger

To: sharechat@sharechat.co.nz

Sent: Thursday, April 05, 2001 4:26 PM

Subject: [sharechat] FFS and RBC

I read Gerry's message the other day how RBC would be a better buy than FFS with RBC worth about 1.4 to 1 FFS share. How would it work if you already had a heap of FFS shares? Would it be better to buy more FFS to reduce the headsum or..  buy RBC and hope to dilute the FFS loss that way? I bought a few RBC the other day but unfortunately I bought at the very top. I guess either way I would be buying to dilute both head sums at the moment. Any ideas? I own far more FFS than I do RBC

Thanks..John