SAAG Private Placement Priced At 10 Sen!

This is how SAAG has been trading the past one year.



It's not too happening yes?

And its earnings is not too happening either.

Posted on 28 Feb 2011: SAAG's Earnings

Posted recently on May: Quick Look At SAAG's Earnings



And the company said itself had this interview on Star Biz: Turnaround unlikely for SAAG this year

• ... SAAG started making losses in its financial year ended Dec 31, 2009 (FY09) as revenue fell due to a loss of revenue from its workover rig services operation as well as provisions made for doubtful debts and bad debts. For FY10, the company saw revenue falling by 31% to RM110.6mil while it made a net loss of RM35.7mil compared with a net loss of RM9.5mil in 2009.
  
  SAAG, which operates in a capital-intensive industry, posted a negative cash and cash equivalent for FY10 at RM7.5mil.
  
  ..............
  
  SAAG has also undertaken a private placement as of April which will see it raising some RM19.7mil from the issuance of 197.5 million new shares to address its immediate working capital requirements.
  

Today SAAG announced the pricing details of the said private placement... SAAG fixes placement share price at 10 sen

10 sen!

Oh my!

Now these buyers of these placement shares are extremely generous since SAAG closed today at 7.5 sen!

WOW!

I wonder....

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And Asia Media Trades Higher Despite Massive Dilution In EPS

And at this moment of time, Amedia is trading higher at 27 sen.



Well, if the private placement is going to dilute earnings per share so badly and effectively lowering Amedia's fair value price, why is it going up?

Well, on Bursa website: AMEDIA-Announcement.PDF

Now according to the announcement:



The Placement Shares will be issued based on a discount, if any, of not more than ten percent (10%) to the five (5)-day volume weighted average price (“VWAP”) of AMEDIA Shares immediately preceding the price-fixing date , to be determined by the Board after obtaining all the relevant approvals for the Proposed Private Placement.

Errr.. go figure.

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TA Research's Commentary On AMedia's Private Placement

On Bursa CBRS website: TA Research has a report on ASIA MEDIA GROUP BERHAD. (click on name for the pdf file)

It has a NICE Target Price of 45 sen for Asia Media.



Well it's rather strange and confusing - more so if you read the fine points.

TA Research mentions the dilutions effects.



But look at the "Theoretical New Target Price"

Taking into account the full placement of 35%, our target price would be adjusted downwards to RM0.34/share from RM0.45/share currently.

Now adjusting the price lower is correct. There's 35% new shares. The dilution from the new shares would caused the EPS to be lower, hence a lower target price.

But, but, buttttttttttttt .............................. here comes the screwball.



Valuation and Recommendation
We maintain our Buy recommendation on Asia Media Group with an unchanged target price of RM0.45/share at this juncture.

Duh!

Macam mana ni?

They, TA Research, recognise and acknowledge the dilution impact on the eps caused by the private placement. They ownself said they the "Theoretical New Target Price" would be adjusted lower to 34 sen.... but yet somehow.... without giving any solid reasoning at all, they, TA Research, just said that their recommendation is unchanged with an unchanged target price of 45 sen!!!!!!!

What? Huh? What?

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Why I Don't Like Private Placements At All.

That the stock market is risky is such an understatement. The reality is there isn't a 100% guarantee that one would make a return from their investment in the stock market.

Stock market crashes happens and some happen with many claiming that they weren't warned nor were they prepared for the crash.

And then emergencies in one owns life could happen. Yes, an unforeseeable incident might happen, one that might require one to fork out much more money than they were ever prepared for. And if one does not have other options to access money and the only viable option left is their 'retirement fund' which are represented by stock investment. And since in an unforeseeable incident, one always feels it's bad luck and when bad luck happens everything seems so unfortunate. Like when one if forced to withdraw from their 'retirement fund' or their stock investments, many a times, one would forced to sell at a loss. Yes, when things go wrong, they really go wrong. Yes, it's possible that the deemed 'long term' share investor could be forced out of an investment at a loss due to personal unforseeable incident.

Which is why investors in the stock market should always be given a chance or opportunity to be ADEQUATELY compensated.

Key words here is GIVEN a chance and ADEQUATELY. Now I understand that there's no divine right for any investors to claim that they must make money.

However, if the stock represents a good business and the stock is justified by the investing reasoning made (like not over paying for the investment), then at least the investor, the minority shareholder should be given a chance to be adequately compensated for taking the risk to be a long term shareholder/investor of the business.

To have the company attempting every which way to make a fool of the investor and their hard earned money is simply sinful in my flawed opinion.

Seriously, listed companies MUST stop treating the minority shareholders as OPM or other people's money. Show them the respect. They are the co-shareholders of your business. And the last I know, shareholders are shareholders are shareholders. They are your business partner. Treat them with respect.

And if you understand what I have written so far, then you should understand why I absolutely hate private placements.

It stinks to high hell!

And that's being polite.

Private placement discriminates the existing minority shareholders and it short changes the minority shareholders big time.

Last night I posted The Insanity Of Asia Media's Private Placement. It's a private placement which involves the creation of some 79.800 million shares or an extra 35% new shares.

Disclaimer first: DO NOT GET ME WRONG HERE BECAUSE I AM NOT SPEAKING FOR THE SAKE OF AMEDIA BUT I AM WRITING BECAUSE I SEE PRIVATE PLACEMENT HAPPENING WAY TOO OFTEN! IN MY FLAWED OPINION IT'S A FUND RAISING ACTIVITY WHICH UTTERLY DISCRIMINATES THE MINORITY SHAREHOLDERS.

Let me highlight the Amedia example again as mentioned in the posting The Insanity Of Asia Media's Private Placement.

Asia Media has a share base of 228 million shares.
A private placement of 35% would see some 79.8 million shares being created.

Which means Asia Media would end up with a share base of 307.8 million shares.

Not sure of the implications?

It's rather simple.

Assume for a moment that Asia Media 'could' earn some 10 million for the fiscal year.

Based on 228 million shares, this would mean an eps of 4.3 sen.

And if you think this stock deserves a fair value PE of 10x, then the fair value price should see the stock valued at 43 sen.

So far, ok?

Now consider this new share base of 307.8 million shares. Now an earnings of 10 million would equate to an eps of only 3.2 sen. And using the same 10x PE multiple, the stock fair value would shrink to just 32 sen!!!!

See how the value shrunk?

See how the value had shrunk from 43 sen to 23 sen? 32 sen?

Remember EPS means earnings per share. Previously before the private placement, the current minority shareholder is getting an eps of 4.3 sen. Now due to the private placement, the current minority shareholder sees their eps shrunk to just 3.2 sen.

They have just lost the 1.1 sen.

In Amedia case, I have stated that this placement SHOULD have been done before AMedia is granted listing!

Hello Bursa?

Where's the so called Quality Control?

Where's the previous objective of trying to improve the quality of the listing?

How could you let a company list in January 2011 and only to announce on 1st June that it wants to list an additional 79.800 million new shares? How could it let Amedia increase its sharebase by 35% just like that?

Won't the existing shareholders feel as if they have been mighty screwed big time??

And if a company wants to do a private placement because they want to raise funds, why discriminate the existing shareholders? Why can't they do a RIGHTS issue? In the case of the rights issue, EVERY single shareholder is given an EQUAL opportunity to participate fairly.

By doing a placement, it means exclusivity. It's exactly like privileged placement.

Which is so wrong.

And yes, let me say this again. Right or wrong, I am STRONGLY against private placements of new shares.

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The Insanity Of Asia Media's Private Placement

I just read this absolutely astonishing announcement from Asia Media (Amedia).



It's going to do a 35% Private Placement of new shares!

Yes!

THIRTY FIVE PERCENT!!!!

That's insanity!

Ok, for those who are holding shares in Asia Media. This is what's happening.

Asia Media has a share base of 228 million shares.
A private placement of 35% would see some 79.8 million shares being created.

Which means Asia Media would end up with a share base of 307.8 million shares.

Not sure of the implications?

It's rather simple.

Assume for a moment that Asia Media 'could' earn some 10 million for the fiscal year.

Based on 228 million shares, this would mean an eps of 4.3 sen.

And if you think this stock deservces a fair value PE of 10x, then the fair value price should see the stock valued at 43 sen.

So far, ok?

Now consider this new share base of 307.8 million shares. Now an earnings of 10 million would equate to an eps of only 3.2 sen. And using the same 10x PE multiple, the stock fair value would shrink to just 32 sen!!!!

See how the value shrunk?

I seriously do not understand what's happening. Ok, it's 35% to be allocated to Bumi investors. No problem but why couldn't Asia Media DO THIS PLACEMENT BEFORE LISTING?

Why list and then now only do this private placement?

With a private placement now, all the existing shareholders would see their value shrunk caused by this GODZILLA size private placement!

OMG!

for the record: back in 2009 : Sanichi's Mind Boggling 44% Private Placement!

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Sanichi's Mind Boggling 44% Private Placement!

Published on the Edge Financial Daliy: Sanichi proposes 44% private placement

• KUALA LUMPUR: SANICHI TECHNOLOGY [] BHD [] has proposed a private placement of up to 50 million new shares of 10 sen each, representing 44.05% of its existing paid-up capital, to raise additional working capital and to repay borrowings.
  
  In a statement yesterday, Sanichi said its paid-up capital would be increased to 163.5 million shares, and the placement shares would represent about 30.58% of the enlarged capital.
  
  It will place out the shares, via MIMB Investment Bank Bhd as the placement agent, to investors to be identified at a later stage. The ACE Market-listed company designs and fabricates precision moulds and tooling.
  
  The private placement proposal would need its shareholders’ approval. Sanichi said it would also obtain its shareholders’ approval in the event that the shares were issued to its major shareholders, directors and/or its chief executive, and/or persons connected with them.
  
  Sanichi said in order to maximise the proceeds and subject to market conditions, the proposed private placement may be implemented in tranches.
  
  Assuming an indicative issue price of 10 sen per share, it would raise up to RM5 million, which would be used for working capital (RM2.85 million) and repayment of bank borrowings (RM2 million) as well as to defray related expenses.
  
  Sanichi said based on the group’s unaudited financial statements as at June 30, 2009, its gearing ratio was about 0.92 times.
  
  “With regard to internally targeted levels for the company’s gearing and interest servicing position, it is the board’s opinion that any fund-raising exercise at this juncture should be in the form of equity rather than debt,” it said.
  
  Sanichi said assuming an average borrowing cost of 5.5% per annum, the repayment of bank borrowings of RM2 million would result in estimated interest savings of about RM110,000 per annum.
  
  It expects the application to Bursa Malaysia Securities Bhd for the proposed private placement to be made within two months, and the exercise to be completed during the last quarter of 2009.
  
  
  This article appeared in The Edge Financial Daily, September 16, 2009.

There goes the neighbourhood!

A 44% private placement????

This would mean that the minority shareholders would see 44% dilution in their earnings per share for their investment in Sanichi!

A 44% dilution!

What on earth is happening here?

Wasn't there a limit on the how much you can place out?

If this keeps going on, what's the point of even investing?

Sigh!

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It's A 20% Placement For AirAsia!

Oh my!

Big talk from AirAsia yet again!

On the Business Times today.

• AirAsia sees more than RM1b in coffers
  By Jeeva Arulampalam Published: 2009/08/04
  
  Low-cost carrier AirAsia Bhd (5099) expects to have more than RM1 billion in its coffers by the end of the year, as it grows its profits and undertakes a private placement, says its chief.

Hmmm... let's see if such big talk is achievable. As per last reported earnings AirAsia only had some 223.991 million in its piggy bank and total loans stood at 6.934 Billion.

• “The cash will be used to lower the group’s gearing,” group chief executive officer Datuk Seri Tony Fernandes told reporters after the airline’s annual and extraordinary general meetings in Sepang yesterday.

Well I do hope that. No company can borrow and borrow forever like how AirAsia did. If I remember correctly AirAsia only had some 95.4 million in loans after listing end 2004. It's now only Aug 2009. Five short years and AirAsia loans had exploded to some insane 6.9 billion.

Now surely Houston that WAS a massive problem!

• In an announcement to Bursa Malaysia yesterday, AirAsia has proposed a private placement of up to 481.14 million new ordinary shares of 10 sen each, which could potentially raise gross proceeds of up to RM601.43 million.
  
  The proceeds are based on an issue price of RM1.25 per placement share, representing a discount of 3.10 per cent to the five-day weighted average market price of AirAsia shares up to and including July 27 of RM1.29.
  
  This will represent up to 20 per cent of the issued and paid-up share capital of AirAsia as at July 27 of RM237.56 million, comprising 2.37 billion shares.

Oh no..... 20% dilution for minority shareholders!!!! Well what else can they expect? If AirAsia do not raise this capital, it's really a sitting duck!

Oh rm1.25 per share.

No wonder AirAsia - the stock - had been flying high lately. :p2

• “Our aim was just to raise some RM500 million to reduce our net gearing.
  
  We have received interest from many local and foreign investors,” said Fernandes. The placement will reduce the airline’s net gearing from 3.71 times to 2.56 times based on its unaudited accounts as at March 31 2009. As much as RM68.76 million of the proceeds will be used to re-pay part of AirAsia’s interest-bearing borrowings.

Waaa.... plan to raise some rm500 million... but.... but... if my understanding of English is not flawed, AirAsia is now saying only rm68.76 million will used to re-pay part of AirAsia's interest-bearing borrowings!

Holy cow!

6.9 Billion minus rm68.76 million still equals many, many, many moolah!

Errr... the inquiry mind wants to know why AirAsia wants to raise so much money then?

Let me guess... lol... pay for new aircrafts is it?

How helpful will this placement be then?

• When asked if the placement will be done in tranches, Fernandes said the group would rather place the 20 per cent altogether upon receiving the necessary regulatory approvals.
  
  The private placement is expected to be completed by the fourth quarter of this year.
  
  Meanwhile, the group’s current cash and cash equivalents as at March 31 2009 stood at RM223.99 million.
  
  On the airline’s overall business, Fernandes said passenger growth was good for its second quarter ended June 30 2009, with a load factor of 76 per cent.
  
  “We do hope to announce a positive second quarter and move towards a profitable full year,” he said.
  
  AirAsia is expected to release its fiscal second-quarter results within the next two weeks.

HOPE to announce a positive second quarter?

• It posted a net profit of RM203.1 million for its first quarter.
  
  Fernandes also said that AirAsia is currently in discussions with Malaysia Airports Holdings Bhd over the outstanding airport taxes owed to the airport operator.

LOL! See how that rm203.1 million is engraved as AirAsia's first quarter total profits. Well we do know that much of it came from extra-ordinary gains!

• “The airport charges should be resolved in the next two to three weeks,” he said.
  Fernandes also denied that AirAsia is eating into Malaysia Airlines’ (MAS) market share.
  
  Rather, it has grown the domestic and regional air travel markets.
  
  “The only way we have grown from 200,000 to 24 million passengers is by offering low fares and developing 44 new routes.
  
  I can’t see how we can cannibalise when we start flying brand new routes not served by MAS,” he said.

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RCE Capital's Private Placement

You could not ask to write a much better script. :)

Last night the Edge Financial Daily uploaded this.

• RCECap fixes placement price
  Written by The Edge Financial Daily
  Monday, 27 July 2009 22:26
  
  KUALA LUMPUR: RCE CAPITAL BHD has fixed the issue price for its private placement of 71.09 million shares of 10 sen each at 55.03sen per share.
  
  In a statement today, RCE Capital said the price was a discount of 10% to the five-day weighted average market price from July 20 to 24 of 61.15 sen per share.
  
  It said the private placement was expected to be completed by mid-August.

Private placement fixed at 55.03 sen.

Hmm.... my a private placement. Now this is a good reason to buy up the share.

And this morning, the Edge Financial MADE another posting.

• RCE Capital up in very active trade
  Written by Joseph Chin
  Tuesday, 28 July 2009 09:49
  
  KUALA LUMPUR: Shares of RCE CAPITAL BHD was the most active counter in early trade on July 28 in the absence of corporate news except that it had fixed the placement shares at 55.03 sen each.
  
  At 9.44am, it was up three sen to 65.5 sen with 7.31 million shares done.
  
  The company announced on July 27 the private placement of 71.09 million new shares of 10 sen each to investors was fixed at 55.03 sen.
  
  RCE Capital said the issue price was arrived at after applying a discount of 10% based on the 5-day weighted average market price of RCE shares from July 20 to 24 of 61.15 per share.
  
  With the price-fixing of the placement Shares, the company said it expected the private placement to be completed by mid-August.

Hmm.... private placement. Benefiting those placement buyers. Let's get active yo!

And then K&N Kenanga decides to issue a buy report on RCE.

Its buy target 70 sen. LOL!

Talk about sweet, sweet timing.

Life is simply grand.

Let's push up the shares so these private placement buyers could get rich fast!

Sweetness!

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Some More Thoughts On AirAsia's Proposed Stock Sale

I was just wondering.

Ok, I was thinking for a moment. Hey I could be wrong hor.

Anyway as per yesterday's posting Comments On AirAsia Stock Sale

• Piggy bank cash balances now is at 223.991 million. Total loans stood at 6.934 Billion!!!!!!!

Now assuming the full 500 million raised from the stock sale is used to par down AirAsia debts, it would mean a cash balances of 223.991 million versus a reduced loans of 6.4 Billion!

Which is still incredibly high, yes?

And considering that AirAsia is going to have to take delivery of more new planes, surely this is not cutting it, yes? I mean the total debts is still going to increase a lot!

Now since AirAsia Says That "There Is A Huge Appetite For Our Shares...", I am wondering....

So how about AirAsia doing a more BIGGER stock sale?

How about a 1 for 1 rights issue?

Yeah, instead of getting new investors, why don't AirAsia current shareholders, fork out more money?

As mentioned, a 20% stock sale or placement could raise some 500million, just imagine how much a 1 for 1 rights issue could raise?

How about this?

At least this way AirAsia could really raise a whole lot of money!

And at least, it also shows how much AirAsia's own shareholders are really optimistic about AirAsia's future prospects.

Just food for thought lah.

If you don't like it, just spit it out. :D

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About SAAG

My dearest Moo Moo Cow,

Were you aware of the issues regarding SAAG placement issues? This issue was also highlighted on last weeks Edge Weekly: 9 Apr 2007: Corporate: Curious exercise at SAAG

The issues mentioned was highly 'interesting'.

• Nevertheless, the company's first tranche of private placement shares (the whole private placement is for up to 5.4 million shares) only managed to sell at RM1.45 each, which was an 8.8% discount to the average price in the five trading days ending Feb 5. Investors continued to place a low value on SAAG shares even after its year-end results were released. The second tranche, priced as at March 9, was issued at RM2 a share, or a 7.4% discount to market. This indicates that despite SAAG already trading at cheap valuations, investors were not willing to buy the stock without a discount. Since mid-March, however, SAAG stock has climbed steadily. It hit its year-high of RM4.46 last Wednesday, which is almost 11 times last year's earnings per share. And, curiously, investors seem more willing to pay a premium for the stock now that it is trading at higher valuations. The third tranche of placement shares were sold at RM3.10, or 5.8% over the average market price up to March 23. A week later, the fourth tranche's issue price was fixed at RM4, almost 10% above average prices up to March 30. The stock closed at RM4.18 last Friday, which means these investors are already sitting on a gain.

WOW!

The two issues mentioned.

1. Still, at the time they took up the placements, were these premium-paying investors acting irrationally?
2. Or did they know of developments in the offing that will add more value to the business and justify a higher share price?

How????

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