michael_selway
Coal & Phosphate, thats it!
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Is a counter bid likely?
thx
MS
Earnings and Dividends Forecast (cents per share)
2008 2009 2010 2011
EPS 51.8 134.5 56.1 109.8
DPS 53.0 34.3 21.7 41.2
FLX - Felix Resources
- Thread starter Dutchy3
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Is a counter bid likely?
thx
MS
Earnings and Dividends Forecast (cents per share)
2008 2009 2010 2011
EPS 51.8 134.5 56.1 109.8
DPS 53.0 34.3 21.7 41.2
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Previous reports, very many of them, expected the Yanzhou bid to come in just under $20 per share. So they are keeping, so it would seem, a couple of dollars in the piggy bank.
If the bids go a lot higher I would expect Shenhua Energy to take over the Chinese bidding as the largest coal miner. Shenhua are building eleven holding areas for semi-soft coking coal and (PCI coal most of which is being bought as higher grade thermal).
In my view, Yanzhou Coal do not really cut the mustard if bidding reaches $24 or more per share.
Bidders said to be lining up in a Bloomberg report are Noble Group, Shenhua Energy, Vale SA, Peabody and Xstrata.
No mention of my favourite "White Night" BHP Billiton. BHP have a mine in NSW that is expected to ramp up to 15mtpa and my feeling is that they'd like/ prefer to control the Moolarben 13mtpa low cost future mines as well. I would say that the majority of those I speak to do not agree with my view.
Have I bought more stock? No, as I added some early in the year and I'm in mega-deep now.
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Detailed analysis of the potential bidders and likelyhood of a counter.
http://longterm.blogspot.com/2009/08/felix-resources-flx-flxax-takeover.html
Like Noirua i'm not buying more now but this seems like a good, asymetric, opportunity. FLX is already too much of my portfolio so simply not selling is a big bet on a higher offer.
A counter is quite likely but only a few of the mooted names have the capacity to play.
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Hi zaz, I thought I should point out an error concerning Vale do Rio Doce (Vale) and the comment in the blog you have shown a link to. The blog says that Vale own AMCI which is not correct at all and could be seriously misleading.
In early 2007 Vale purchased AMCI Australia's Hunter Valley and Bowen Basin coalmines. About $835 million was paid to AMCI for these coalmines.
AMCI (based in the United States are America's largest exporter of thermal coal) including their Australian subsidiary is a private owned company. Mr Hans Mende, a director of AMCI and of Felix Resources, owns part of the privately owned AMCI.
AMCI used part of the proceeds from the mining sales in early 2007 to take stakes in Gloucester Coal, Centennial Coal and Felix Resources.
In the bloggers defence there are errors at Wikipedia and a few other sources. There are other minor errors and omitions in the blog.
While BHP is often mentioned in these sorts of situations, I've yet to see them make a bid for some of the smaller miners. Although just now the possibility of ~$10bn kitty being fair for acquisitions (BHP CFO - Inside Business). I think they are only a small chance at best as that would take a fair chunk of that.
I am unsure whether the Chinese would get into a bidding war against another Chinese co. I don't think that is part of the "chinese way" but we will see.
A bid over $20 would push the total price over $4bn, which is a fair bit to pay, I have a feeling that may be too much for others players, even the large ones.
Was a lot of traders getting out on Friday I would say to get their capital back. Some may have gone straight into CEY, although that may only be co-incidental the spike there. Most traders aren't interested in waiting until December, or the possibility of the transaction not going through. High volume indicates for the many sellers there were many buyers willing to speculate on a higher price being presented. But I'm not sure TBH.
I am unsure whether the Chinese would get into a bidding war against another Chinese co. I don't think that is part of the "chinese way" but we will see.
A bid over $20 would push the total price over $4bn, which is a fair bit to pay, I have a feeling that may be too much for others players, even the large ones.
Was a lot of traders getting out on Friday I would say to get their capital back. Some may have gone straight into CEY, although that may only be co-incidental the spike there. Most traders aren't interested in waiting until December, or the possibility of the transaction not going through. High volume indicates for the many sellers there were many buyers willing to speculate on a higher price being presented. But I'm not sure TBH.
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Felix Resources share price as far as a takeover is concerned has moved more towards earnings potential than asset value.
Coal production will treble over the next four years with Moolarben adding over 10mtpa on its own for Felix - the coal is low cost.
Yarrabee will add 1mtpa of PCI coal and more when the Wilpeena area is developed (north Yarrabee).
Ashton production of semi-soft coke will ramp up by a further 1.5mtpa for Felix in the next two years.
Athena (near Minerva) is as large as Moolarben and is also a future mine.
Profitability does depend on the coal price and whether all this coal can be sold.
On the likely outcome in 2009 profits, if these go on, on the same basis by 2013 then profits should reach $1.2 billion. But there is the gamble on coal price and sales.
Is Felix worth $3.5 billion or more like $7 billion. Depends if you are an optimist or pessimist on the coal price?
Coal production will treble over the next four years with Moolarben adding over 10mtpa on its own for Felix - the coal is low cost.
Yarrabee will add 1mtpa of PCI coal and more when the Wilpeena area is developed (north Yarrabee).
Ashton production of semi-soft coke will ramp up by a further 1.5mtpa for Felix in the next two years.
Athena (near Minerva) is as large as Moolarben and is also a future mine.
Profitability does depend on the coal price and whether all this coal can be sold.
On the likely outcome in 2009 profits, if these go on, on the same basis by 2013 then profits should reach $1.2 billion. But there is the gamble on coal price and sales.
Is Felix worth $3.5 billion or more like $7 billion. Depends if you are an optimist or pessimist on the coal price?
michael_selway
Coal & Phosphate, thats it!
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Yes MS. They sold it to NHC in 2000 around about for like $200k (well cheap - don't quote me on the exact figure, I put it in the relevant thread at the time I recall) then bought it back for $2.5billion.
Thanks to Zaz's Post #944, I have just posed this on the website he /she refers to.
As a Felix Shareholder for some years, I would be happy with an all share deal from BHP, at the equivalent of say $25 a share in BHP shares.
This would suit many shareholders with large CGT Liabilities,and the strength of BHP for future values.
Thanks for your excellent analysis of the potential bidders, making BHP the clear leader in the field.
As a Felix Shareholder for some years, I would be happy with an all share deal from BHP, at the equivalent of say $25 a share in BHP shares.
This would suit many shareholders with large CGT Liabilities,and the strength of BHP for future values.
Thanks for your excellent analysis of the potential bidders, making BHP the clear leader in the field.
Thanks to Zaz's reply #944 I have just posted this on the website he refers to.
"As a Felix Shareholder for some years, I would be happy with an all share deal from BHP, at the equivalent of say $25 a share in BHP shares.
This would suit many shareholders with large CGT Liabilities,and the strength of BHP for future values.
Thanks for your excellent analysis of the potential bidders, making BHP the clear leader in the field."
"As a Felix Shareholder for some years, I would be happy with an all share deal from BHP, at the equivalent of say $25 a share in BHP shares.
This would suit many shareholders with large CGT Liabilities,and the strength of BHP for future values.
Thanks for your excellent analysis of the potential bidders, making BHP the clear leader in the field."
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Profile of Felix Resources director Mr Hans J Mende (the ownership dispute ended in a $7.00 offer for Gloucester Coal by Noble Group, Mr Hans Mende and AMCI Group accepted the offer. However, Noble Group failed to get 100% of the group and the offer ended with them having a majority holding. : http://www.theaustralian.news.com.au/business/story/0,28124,25450525-5001641,00.html
I notice this paragraph in the 13 August offer details from Felix.
"The transaction is unanimously recommended by Felix‟s Board of Directors subject to the opinion of the Independent Expert and in the absence of a superior proposal.
Wait a minute. Who is this "Independent Expert"? If he or she is Independent, we should have the right to know who it is.
Who or how is the IE picked?
Why "The" Independent Expert? Seems their identity is already known.
I would like to know how he or she can maintain the offer is fair, when virtually all the Press has said an offer of around $24 is the right ball park figure, and Bloomberg maintains the bidders are lining up, naming them.
Many may drop out, not because they don't believe a figure of £24 is reasonable, but because they can't raise the money.That fact doesn't alter the opinion of virtually every Mining Commentator who has pitched near the $24 figure.
Come on B.F, tell us who you have picked? Presumably out of a hat, or how can you call them "Independent"?
It's pretty clear that an Independent Expert is not going to put egg on your face by announcing a fair price of $24. Your negotiating skills would look threadbare, and may still do so.
So it looks like the opinion of this so-called "Independent Expert" is preordained.
Methinks the ASX should look into this. Is this mystery figure going to support B.Fs judgement for a nice fat fee, or is their opinion going to have scorn poured all over it by virtually all the other Experts who point to $24?
I reckon this Independent Expert is caught between a rock and a hard place. If he/she supports B.F and the Board's valuation, his or her valuation judgement will not carry any weight in future lucrative Valuation proposals.
I guess their only way out would be to do this calculation on the back of an envelope , for which a fat fee will be paid
Got your pencil out INDEPENDENT EXPERT?
[$24 -$18] / 2 = $3. Add to $18 = $21 THE HALF WAY HOUSE USUALLY PRESERVES ALL INTEGRITIES, and gives the remaining players a base from which to pitch their real bids.
No really Independent Expert can justify $18. Everyone except B.F. and his Board seems agreed on this !!
"The transaction is unanimously recommended by Felix‟s Board of Directors subject to the opinion of the Independent Expert and in the absence of a superior proposal.
Wait a minute. Who is this "Independent Expert"? If he or she is Independent, we should have the right to know who it is.
Who or how is the IE picked?
Why "The" Independent Expert? Seems their identity is already known.
I would like to know how he or she can maintain the offer is fair, when virtually all the Press has said an offer of around $24 is the right ball park figure, and Bloomberg maintains the bidders are lining up, naming them.
Many may drop out, not because they don't believe a figure of £24 is reasonable, but because they can't raise the money.That fact doesn't alter the opinion of virtually every Mining Commentator who has pitched near the $24 figure.
Come on B.F, tell us who you have picked? Presumably out of a hat, or how can you call them "Independent"?
It's pretty clear that an Independent Expert is not going to put egg on your face by announcing a fair price of $24. Your negotiating skills would look threadbare, and may still do so.
So it looks like the opinion of this so-called "Independent Expert" is preordained.
Methinks the ASX should look into this. Is this mystery figure going to support B.Fs judgement for a nice fat fee, or is their opinion going to have scorn poured all over it by virtually all the other Experts who point to $24?
I reckon this Independent Expert is caught between a rock and a hard place. If he/she supports B.F and the Board's valuation, his or her valuation judgement will not carry any weight in future lucrative Valuation proposals.
I guess their only way out would be to do this calculation on the back of an envelope , for which a fat fee will be paid
Got your pencil out INDEPENDENT EXPERT?
[$24 -$18] / 2 = $3. Add to $18 = $21 THE HALF WAY HOUSE USUALLY PRESERVES ALL INTEGRITIES, and gives the remaining players a base from which to pitch their real bids.
No really Independent Expert can justify $18. Everyone except B.F. and his Board seems agreed on this !!
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You can be 100% sure that the independent expert's report will support the directors who pay for it. There are lots of ways to justify $18. You value Felix, then discount Moolarben by 50% because it still needs to be built. Then you add a discount for the risk of a current shareholder selling a blocking stake. Hey presto you're at $18. The funny thing is the "Independent" expert will probably believe what he's written.
In valuation you can squeeze the numbers until they sing. The profession is rife with bias but it's not illegal. It's probably not even immoral, it's a professional opinion subtly biased by whoever is paying.
In the end we can all pay for our own expert valuations and decide how to vote our shares. The directors have to go through this process but there is no chance it will go against them and the valuer will get a fat fee for their troubles.
doctorj
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Very true - I'm looking at company right now who's expert valuation has come in at nearly 4 times the expert valuation we paid for. Both methodologies are sound, it's the assumptions and discount rates that always make the difference...
To be honest, it'd make my life easier if they were closer together, even if it meant 'our expert' valuation was higher. Try to explain to a credit committee why you should pay significantly more than your own independent valuation...
For me, the difference is in the mentality. If you're doing a valuation commissioned by the seller, you look for the most favourable assumptions that appear resonable and defendable. If you're commissioned by the buyer, you're looking for the lowest that fit those same criteria... The reality is the truth probably lies somewhere in the middle.
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Markets are starting to crumble somewhat and particularly China, and this tends to make a rival bid expectation somewhat lower. Afterall, Yanzhou's bid was $2 less than expected.
Felix Annual results are out at the end of August and regulatory approval of the bid is earmarked for end of September. So, making a rival bid without being able to read these thoroughly and before the bid is approved, looks unnecessary, why bother. In addition, markets might well fall and coal prices at the same time.
I still expect a counter bid by early October but only in the region $19.50 - $20.50, and improving on the SACCS stock handout. In the week following, depending on market conditions, a higher offer MAY come.
Markets change suddenly and it's necessary to be flexible and accept it.
Felix Annual results are out at the end of August and regulatory approval of the bid is earmarked for end of September. So, making a rival bid without being able to read these thoroughly and before the bid is approved, looks unnecessary, why bother. In addition, markets might well fall and coal prices at the same time.
I still expect a counter bid by early October but only in the region $19.50 - $20.50, and improving on the SACCS stock handout. In the week following, depending on market conditions, a higher offer MAY come.
Markets change suddenly and it's necessary to be flexible and accept it.
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bought into these today for my SMSF pension.
the takeover documents state that the first 50c dividend will be fully franked
and they expect the 2nd one to be as well
so on a 100c dividend, I would be looking at 42.9c franking credit.
at my buy price of 17.43, that gives me a return of exactly $1
ie ($16.95 +5c) + (100c +42.9c)
on a 5 month turnaround that is 5.73% (13.7% annualised)..imputation credits are fully credited in pension phase
that is a reasonably acceptable return for a super fund, and certainly beats bank interest
Am i missing something??
If the price drops again, I might load up some more, as there seems to be small downside risk, and some up side of possible better bid.
Is the 5c "in specie distribution of shares in SACC" to be paid in cash?
the takeover documents state that the first 50c dividend will be fully franked
and they expect the 2nd one to be as well
so on a 100c dividend, I would be looking at 42.9c franking credit.
at my buy price of 17.43, that gives me a return of exactly $1
ie ($16.95 +5c) + (100c +42.9c)
on a 5 month turnaround that is 5.73% (13.7% annualised)..imputation credits are fully credited in pension phase
that is a reasonably acceptable return for a super fund, and certainly beats bank interest
Am i missing something??
If the price drops again, I might load up some more, as there seems to be small downside risk, and some up side of possible better bid.
Is the 5c "in specie distribution of shares in SACC" to be paid in cash?
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If Yanzhou manage to jump through the Chinese and Aussie hoops then a vote would be taken by shareholders. Yanzhou have not said whether they would accept less than 90% acceptance as yet.
All the above is subject to a counter bid not being made.
A lot of stock changed hands since last Friday and one large holder is reported to have sold out off market and a number of other off market trades have been reported. Yanzhou may not buy Felix stock in the market or as an off market trade, as yet.
Buying Felix stock now looks to be a good gamble. Should you gamble with your pension though?
SACCS is an in-species distribution of SACC stock and is subject to an ASX quotation being made within the Yanzhou time table, which I believe is subject to change depending on any delays in regulatory approval.
The 50c final dividend will be paid at the end of October, this is certain. The other two 50c dividends are subject to bid procedure and may not be made.
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thanks for the reply
I think there is only 2 divs in total, not 3 as your reply infers?
I realise the deal may not proceed, that is the downside, but that risk seems fairly slight, if it does, we will all get wacked in the short term
as to gambling with the pension, stocks are a gamble, but bank interest rates are a dead set cert, too low, this one seems like a low risk, and I use position sizing to manage risk.
imputation credits are a big factor in pension phase ( mine anyway)
thanks for the insight into the SP fall, it has me cautious about grabbing anymore
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Hi awg, If you go to the Felix website you will see that the Felix final dividend is paid in late October - irrespective of the bid situation. At about that time a further 50c dividend will be paid separately - respective of the bid situation and a further 50c dividend in December also respective of the bid situation. The final payment of $16.95 will also be paid separately in December.
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Now that's a decent and rewarding dividend! Considering the price of the share. That seems to be a good yield
