|
Printable version |
From: | nickk@quicksilver.net.nz |
Date: | Tue, 20 Nov 2001 19:40:27 GMT |
nick no....but funny thing is..he is irish!!! nk nick writes: > > > > Gaynor: Frucor share offer looking tasty > > 21.11.2001 By BRIAN GAYNOR > Investors should think twice before rejecting the $2.35 a share bid for >Frucor. > > Although Grant Samuel has valued the company between $2.53 and $2.96 a share, >recent experience indicates that the company may not achieve the profit >forecasts on which this assessment is based. > > We need to look at Frucor's history to see why shareholders may be best >advised to disregard the independent directors' "don't sell" recommendation. > > In June 1998, the Apple and Pear Marketing Board sold Frucor to a consortium >of investors, mainly from Australia, for $50.4 million. > > In a complex capital reconstruction, the consortium contributed $18.7 million >and borrowed the rest of the purchase price against Frucor's assets. > > In the middle of last year, the consortium offered 62,625,000 existing Frucor >shares (50.1 per cent of the company) to the public at an indicative price >range of between $1.95 and $2.25 a share. > > The issue price was eventually reduced to $1.50. > > After its sharemarket listing in June last year, Frucor released a spate of >positive press statements and analysts fell in love with the stock. Most have >had a "buy" or "strong buy" recommendation for most of the past 17 months and >their valuations have generally been well above the company's share price. > > As one would expect, Frucor achieved its profit forecast for the June 2000 >year because the prospectus was issued just six weeks before the balance date. > > But the year to last June was a different matter. Frucor reported a net >profit of just $11.7 million, compared with a prospectus forecast of $20.4 >million, and operating earnings of $13.3 million in the previous year. > > The poor result was due to the disappointing performance of its V energy >drink in Britain. > > The Grant Samuel report revealed that Frucor recorded a net loss of $4.6 >million between July 1 and October 26. Although the company is subject to >seasonal factors, this indicates that it is performing well below the year to >June. > > Frucor must earn $11 million this month and next to match last year's interim >result of $6.4 million. Based on experience, this is extremely unlikely unless >its advertising spending is slashed. > > There are several additional observations from the Grant Samuel report: > > * Frucor is highly geared, with shareholder funds of just $27.8 million and >assets of $124.1 million, including $33.6 million of intangibles. > > * The company's bid to establish itself in Britain has not been successful. > > Grant Samuel concludes: "The sales performance for the first four months of >the current financial year has been poor due to an overall decline in the >energy drinks market in the UK. Frucor's UK business is continuing to incur >significant losses and in Grant Samuel's opinion, may not be viable in the >absence of a strategic partner." > > When Frucor was floated last year a great deal of emphasis was placed on its >expansion into Britain. The success of this strategy was important because the >Australian-led consortium had extracted full value from the company and left >it with a highly geared balance sheet. > > The Australians now want to get out. They will realise a profit of more than >$220 million on their original investment of just $18.7 million if Danone's >bid is successful. > > Frucor's remaining shareholders should seriously consider accepting the >offer, but should wait until just before the December 7 closing date before >making a decision. > > The company is expected to report a disappointing result for the six months >to December 31 and may need to raise more capital to strengthen its balance >sheet. > > This suggests that its share price could fall well below $2.35 if the bid is >unsuccessful and Danone walks away > ---------------------------------------------------------------------------- To remove yourself from this list, please use the form at http://www.sharechat.co.nz/chat/forum/
References
|