World Precision Machinery

Benjamin Chan wrote:

I agree with you Harlequin. This looks to me a classic example of arbitrage opportunity. I don\'t expect the -10% conditions (separately for YTD 6M, YTD 9M and FY 08) to be violated given that the Q108 result was already 46% higher than Q107.

Ya 46% higher. But the proportion of Q1 for whole year NPAT for last 2 years was about 1/6. 1st and 2nd quarters made up of 30 somethings percent only. But since this offer come after Jun, we can assume that Bright World already hit the target for 1H2008. Harlequin, As usual, analysts that churn out the reports are of the same kind. Ya will be pay with shares of the newcompany if approved. How much Mr Shao get depend on how well Bright World perform in FY2008 NPAT subject to a maximum limit. With this kind of agreement, expect him to shoot for the sky in NPAT for 2008.

donmihaihai: thanks for yr comments. just 2 points from me: 1. the takeover condition relates to % change in profits, so it is not relevant to consider the % that Q1 and Q2 profits make up in relation to the full year earnings. these 2 are separate matters, right? 2. i agree the management has every incentive to shoot for the sky in terms of profit, so it\'s ho sei for Bright World shareholders as the profit condition has a high chance of being met. but scbchan raised a valid point: who are sellingg at ths crazy price? why?

Harlequin wrote:

donmihaihai: thanks for yr comments. just 2 points from me: 1. the takeover condition relates to % change in profits, so it is not relevant to consider the % that Q1 and Q2 profits make up in relation to the full year earnings. these 2 are separate matters, right?

What do you think? Changes in FY profit = changes in 1Q, 2Q, 3Q and 4Q. If 1Q make up 1/6 of the profit and 3Q plus 4Q make up almost 4/6 of total profit, what does that tell us? The increased in 1Q is important but only half as important as the changes in 3Q or 4Q. In fact if we take away technical grant of RMB12 million given in 2007 which included in FY2007 NPAT, we can say the pre-condition of decline of 10% already factor in and Bright World earnings must be at least be flat.

I don\'t think the key problem is the profit condition. I think the shareholders of CHAC need to vote on the acquisition, and a certain percentage of them are required NOT to withdraw their capital. The shareholders vote will be the key issue to watch.

interesting point abt some Shareholders of CHAC being required not to withdraw their capital. but what\'s the meaning of \'withdraw their capital\'? U mean \"cash out\"? this morning, the stock has found strength.

Harlequin wrote:

interesting point abt some Shareholders of CHAC being required not to withdraw their capital. but what\'s the meaning of \'withdraw their capital\'? U mean \"cash out\"? this morning, the stock has found strength.

CHAC operates as a shell company with no business so it\'s something like private equity where it solicits public funds with which it will use to conduct buyouts of a real business. I guess the shareholders would have the right to put back their shares to the company in return for cash in the way you redeem cash from a unit trust; quite different from normal listed companies where cash bailouts typically occur on the secondary open market with company assets unaffected. But it is a definite risk. Perhaps it\'s best to watch out for their shareholder meeting voting results sometime in 4Q.