The
6% Coupon Rate Convertible Notes
On 27 December 2017 (after trading
hours), China Vast (6166.HK) announced the issue of the Convertible Notes and
Notes in the principal amount of up to US$50 m and up to US$110 m. Upon full
conversion of the Convertible Notes at the Conversion Price of HK$4.75 per Conversion
Share, a total of 82,105,263 Conversion Shares will be issued, representing
approximately 5.01% of the existing issued share capital of the Company and
approximately 4.77% of the issued share capital of the Company as enlarged by
the issue of the Conversion Shares. No listing of the Convertible Notes and the
Notes will be sought on the HKEx or any other exchanges.
My
interpretation
It is obvious that this convertible notes
issue has negative connotations of the share prices in the short term. I think
the money is required for the Xiongan New Area (河北雄安新区) project,
which will be coming soon in 2018. The boss bought so many shares from the
market and now he launched his plan to get more money. He must have something
up his sleeve.
It is only natural that the boss planned
this more for himself if he has put in so much money and effort into a company
that he knows best and have great confidence in.
Two things that I can deduce:
(1) $4.75 is what the boss takes as the baseline of the value of his company at this stage, and below which he is not willing to let the bondholders have it. The price is about 21.8% premium to his highest price paid to the market so far. I am glad that my target price of $4.77 estimated more than 5 months ago is very close to the price fixed by the boss now. See my earlier post: http://superphang.blogspot.sg/2017/07/solid-peg-ratio-and-rampant-insider.html
(1) $4.75 is what the boss takes as the baseline of the value of his company at this stage, and below which he is not willing to let the bondholders have it. The price is about 21.8% premium to his highest price paid to the market so far. I am glad that my target price of $4.77 estimated more than 5 months ago is very close to the price fixed by the boss now. See my earlier post: http://superphang.blogspot.sg/2017/07/solid-peg-ratio-and-rampant-insider.html
(2) His willingness to give a generous 6% coupon interest rate
to the bondholders when the company is not in any dire straits speaks volumes
about his great confidence of the business going forward.
Conclusion
With the aforesaid deduction, I have great confidence that China Vast will have a solid report in its next earnings announcement, expected to be on 3rd April 2018.
With the aforesaid deduction, I have great confidence that China Vast will have a solid report in its next earnings announcement, expected to be on 3rd April 2018.
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