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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 -----
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 | 
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