RIN - Rinker Group

Realist said:

Closed at $71.10.

So it's obviously gonna be around AUD $19 to $20 on Monday!!

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michael_selway said:

do you reckon it willopen below that liekmaybe 17 and then slowly creep up to 19?

thx

MS

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kennas said:

This was a great pick up, well done Realist. When were we talking about takeover rumours and thought we picked the bottom? That was a few months ago wasn't it?

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Originally Posted by ducati916

I posted this on the 09-02-2006 on reef

http://lightning.he.net/cgi-bin/sui...ic;f=2;t=000284

Current Price ADR $62.15
Intrinsic Value $21.27 - $28.71

edited...to shorten the read

None of this will come to light anytime soon, this is a slow burn type of bomb, but unless this trend is reversed, there could be problems down the road, as further decreasing revenues in the US that are not picked up in Aus & China, combined with increased CapEx, & poorly controlled costs will impact earnings badly.

If I was holding a long position, I'd be selling.

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noirua said:

Cemex has bid US$12.8 billion for Rinker Group...: http://www.bloomberg.com/apps/news?pid=20601087&sid=a2pr.kU183k8&refer=home

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noirua said:

The bid equates to just A$17 ( $13 ), providing the above article proves to be correct in all details. If the market expects no counterbid then Rinker may well trade in the range A$16.30 - A$16.60 - we do not know the complete bid package yet.

If the market thinks Lafarge or another outfit may counterbid, either a genuine bid or a spoiling exercise, then RIN will open above A$17.

I should have sold this stock at around A$21 when the opportunity was there, it now looks that i'll get somewhere between A$17 and A$19. For me this is a bit of a bail out.

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Julia said:

Apart from Realist, is anyone else a dedicated long term holder, or are we all out when the profit appears to have peaked?

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Realist said:

No, I wouldn't think so. The US stock exchange tells us exactly what people will pay for RIN as they traded it all day Friday, I'll do the maths myself to work out the exact AUD$ price. We all know an exact price and it will open and stay at that price - give or take some small fluctuations.

It may infact open at $20 and go to $19, I doubt it'd open and climb though.

We'll wait and see anyway, I've been wrong before.

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NOBODY who owns shares in Rinker should be surprised that the company has received a takeover offer. The question for them is whether Cemex has a lay-down slam with its $17 a share, $16.8 billion bid.

In my opinion, the answer is no. In the rather prosaic world of concrete and gravel, Rinker has league-table leading statistics. Rinker's board can use them to argue that Cemex has lobbed an opportunistic bid.

One thing the board won't do is declare that Rinker is not for sale. The reality is that the group was set up as a takeover target when it was spun out of CSR in a one-for-one share split in March 2003.

Rinker owns the Readymix concrete, gravel and pipe operation in Australia but its focus from day one has been on selling gravel, cement, concrete, asphalt and concrete pipe in the United States, and in high population growth regions including Florida, Nevada and Arizona in particular.

Chief executive David Clarke has run the company efficiently since the spin-off and has executed a steady stream of mid-sized acquisitions to bulk the group up in the US, which now accounts for 80 per cent of group earnings.

But Rinker is still a middle size fish in the pool it is swimming in, and a takeover bid from one of the bigger players has always been seen as a possible profitable conclusion to the spin-out strategy.

Cemex fits the bill generally: it has a market value of $US22 billion, almost twice as much as the $US11.8 billion price tag it is putting on Rinker (the advertised value of the bid is $US12.8 billion, because Cemex will also inherit about $US1 billion of Rinker debts if its bid succeeds). Other candidates, and possible auction participants, are the French group Lafarge, which is valued at $US23.8 billion, and the Swiss giant Holcim, which is worth $US33 billion.

A Rinker takeover would give Cemex a powerful position in America and put together two of the industry's star performers: Rinker and Cemex are posting the best and second best returns on shareholders' equity in the industry, 27.6 and 23.1 per cent respectively. That's well above Holcim's return of 15.4 per cent, and Lafarge's return of 12.5.

Cemex has been working for about three months on the bid with its investment bank, Citigroup, and has come up with a price that it believes, with some justification, to be substantial.

The $17 offer is 26.2 per cent above Rinker's average share price in the past three months, and 22.6 per cent above its closing price of $13.87 last Thursday (Friday's close of $14.70 is misleading, because traders got wind of the bid just before the close of trade). It is also pitched at 8.7 times Rinker's earnings before interest, tax, depreciation and amortisation, and at a solid 9.2 times EBITDA including Rinker's debts.

Cemex told its shareholders on the weekend that Rinker itself recently estimated that the average EBITDA multiple for a lot of takeovers in the industry was 8.1 times, less than its bid for Rinker. And the bid price is also the equivalent of 17.1 times Rinker's earnings per share in the year to March 31, 2006: that is 20 per cent above the multiple of about 14 times earnings that seems to be a plimsoll line for companies in the heavy materials industry.

Rinker can still make a reasonable case that its shareholders deserve more, however. The group has increased sales at an average rate of 19 per cent a year in the past five years and has grown earnings per share at a rate of 40 per cent a year over the same period: this is industry-leading performance and it drove the group's shares up from less than $5 a share just after the spin-off in 2003 to a peak of $22.22 in late April this year.

But then the share price started falling, and falling, to a low of $12.31 in mid-September, on concerns that America's housing boom was imploding. Housing development in the high population-growth US states that Rinker operates in is a key source of income and profits for the group.

If Rinker opposes the $17 offer as expected, its defence (and Cemex's attack) will revolve around the US housing downturn, and its implications for Rinker's growth in future.

Boom times are certainly over for the time being in the US housing market: spending on new housing in the US fell by 17.4 per cent in the year to September and the slowdown was the main reason America's economy only expanded by 1.6 per cent in the year to September.

Rinker can argue, however, that the downturn is only cyclical and point out that stockbroker analysts still expect the group to boost earnings in the current year from $1 a share to about $1.18 a share. Cemex's bid is therefore only valuing the group at 14.4 times the predicted earnings.

The bid would be pitched at only 12.2 times expected earnings in 2007-2008 if Rinker's five year record of raising earnings per share by an average 40 per cent a year applied. But Cemex will argue that the profit pace Rinker set in the last five years is irrelevant, that in those years Rinker was benefiting from a housing market bubble that has now ended. The slowdown has been particularly abrupt in Florida, the state which is the source of almost 45 per cent of Rinker's cash flow.

If that doesn't work, it will probably sweeten the bid, and win the day.

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