Co announced their 3Q08 results
Downside - Revenue dn 10.33%, Profit dn 55.73%, Loss on investment securities valuation (equities) $624k.
Upside - Declaration of early dividend of 3 cents.
Question is why early divident payout? ..... could it be to entice warrant holder (expiry 30 May 08) to convert (10c at 1:1) early? At todays share price of 36.5c, it does not need this enticement.
Warrant conversion will be mildly dilutive - NAV will be 29.8c (from 30.1c) and after div payout, it will be about 27c.
Looking at the Balance sheet::
About 51.5% ($17.6m) of its current assets is in equities and only 1.2% ($418k) in cash. After divident payout, it would have used up all its cash and proceeds from warrant conversion.
For C. to raise cash, its easiet way is to liquidate some of its equities.......but under today's market cdtn, we can expect further writedowns and losses.
FY09 - If 3Q08 eps of 0.5c is going to be the norm for FY09, then Co. may not be able to meet their divvy forecast of 3.5c, unless they dig into their reserves.
From the above, my opinion is mgmt has over invested in the stock market (51.5% of current asset is definitely improportionate to its core business). It was good whilst it lasted.......but perhaps now they have to swallow the bitter pill.
Furthermore, Co recently announced that the daughter of the Chmn resigned her directorship and exec post of purchaser.....is there more to it than meets the eye?
I would advise forumers not to be enticed by the generous divvy declared (3c) cos the worst may yet to come.
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