Forum Archive Index - April 2001

["greg" <gregoire@paradise.net.nz>]

• Subject: Re: Re: [sharechat] Greg and greg are different.
• From: "SWLEE" <SWLEE@xtra.co.nz>
• Date: Sun, 8 Apr 2001 15:02:52 +1200

---

SWLEE,

  IMHO the pressure driving FFS to 25 and even 24c pre rights issue was the impression that only a small proportion of shareholders would take up their rights.  This would leave the underwriters, chiefly CSFB, with a lot of preference shares which might flood the market at a later date.  In the event 61% of the rights issue was subscribed to - which the market viewed favorably.  It was after all a lot of capital to come up with at short notice.

 

Regards,

greg

 

 

 

 

1) FFS/FFPS share price.

Your argument may have some validity if you believe that 45c was a fair
price to use to work out the final price post the right issues.  I
based my view on FFS/FFPS share being underpinned by the final price RBC
was made to pay, from a number of tell-tale signs arising from events
prior to and after the right issues, to the day when RBC having to pay
for its 267M of FFPS shares:-

First Tell tale sign.
There was unusual jump of share price of FFS from  around 25-27c up to
the last day prior to 32-33c on listing of FFS and FFPS,   If your
argument  above was shared by other investors especially the
institutional, there would have been a big demand for head share of FFS
prior to the listing day to help push up FFS head share, but there was
no evidence of that. On balance of supply and demand, FFS head share
should have been priced reasonably closed to reflect the new listing
price the next day.

Second Tell-tale sign.
There was a huge undersubscribe of the right issues at 25c and yet it
listed on the market for 32-33c the next day. So who else with the right
mind would have bought the shares at such a premium?  when obviously the
supply outweighed demand by country mile. Maybe those who felt they had
missed the boat and would like to get onboard, but I doubt.
With no sufficient taker at 25c a share, the underwriter of the right
issues had the right to force RBC, under the underwriting agreement, to
take up its maximum entitlement of 267M FFPS shares at 25c each upon the
completion of FCL separation process.

Third tell-tale sign.
Under the underwriting arrangement, the underwriter was obliged to
sell, from the date of the right issue in Dec. to the completion date of
FALL separation in march, on behalf of RBC,  any or all of the above 267M
FFPS. It would have been a nice strategic stake for any investor but
again there appeared to be no buyer. That was why RBC has to take up its
maximum entitlement last week.

2) FFS or RBC ?.

Couldn't agree more with those RBC assets you mentioned below, ie not sure-fire winners. But would one like to own them if they given to you virtually free while investing in the forestry stocks? Of course one would. The relative share prices of FFS and RBC are currently reflecting this situation, of course it would be different if RBC share price has gone up substantially. It just like putting a dollar in RBC and get both ways, ie a) On balance of probability, there is better upside to RBC share than FFS/FFPS, SHORT TERM; b)Long term, if FFS/FFPS does well, RBC would inherently do likewise because of the heavy investment RBC has on FFS.

 

I am not suggesting for one moment that one should buy RBC shares instead of other stocks. I stressed in my previous article that only if you still have the affinity for the forestry stocks, then RBC is the better of the two (evils), based on the prevailing relative share prices.

 

 

 

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

From: greg

To: sharechat@sharechat.co.nz

Sent: Saturday, April 07, 2001 4:57 PM

Subject: Re: Re: [sharechat] Greg and greg are different.

Stephen,

I have done my own analysis, and while I agree with many of your points I don't see how you can entertain the idea that the FFS/PA share price was artificially inflated.  As I have already mentioned the share price was trading around 45c during Feb and March last year with the CITIC dispute going to the High Court and wood prices falling.  After recapitalisation this equates to (45+50)/3 = 31.67c.  I have also thought of selling FFS and buying RBC, but I saw the future of RBC as too uncertain.  Some of its biotechnology assets are not sure-fire winners.

 

I draw your attention the Grant Samuel report on the biotech assets sold to RBC.

 

-    Arbogen

-    Trees & Technology

-    Forestadora Tapebicua S.A. (FTSA)

-    Genesis Research and Development

 

RBC will commit $4m per annum to Arbogen, which Grant Samuel calls a ' "virtual company" with only minimal infrastructure, outsourcing its activities whenever possible.'

 

Trees & Technology is a tree improvement business situated in the central North Island.  Their business includes

the research, development, production and sale of tree stocks.

 

FTSA was essentially an investment/study in South America, and while it holds a number of forestry assets, Grant Samuel says "The value of FTSA is driven, in part, by the value of the option to develop a large scale forest based on the Supertree knowledge gained from the FTSA investment."

 

Lastly, there is Genesis of which RBC will hold a 2.95% stake which I would harldy call a sure-fire winner either.

 

These biotech assets are supposedly where RBC is going to generate growth.

I like the look of Trees & Technology, but the other assets seem less certain to provide growth.

 

RBC in my opinion could be a good short term play, with some attractive assets which I bet some players like CITIC would like to get their hands on (esp. Trees & Technology).  But I just don't know enough about the direction of RBC, who's running it and those sorts of things to sell up shop in FFS and buy RBC.

 

Regards,

greg