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Voyage Research clarifies why Sinotel privatisation offer may not be unfair
Liu Jinshu, Deputy Head of Research with Voyage Research has released a report on Sinotel Technologies Limited. Sinotel is currently in the midst of a privatisation attempt by its Executive Chairman. The offer of 9.8 cents a share closes on 24 Apr 2015 at 530pm. In the report, it is highlighted that it is surprising why only 64% of acceptance has been received.
Voyage Research has valued Sinotel at an intrinsic value of 5 cents. The report cites widening losses of RMB 457.9 in FY 2014, high trade receivables and qualified accounts from its auditors. All these then cast doubt about whether Sinotel is a going concern.
The Independent Financial Adviser’s report on this privatisation attempt has labelled the offer as unfair. This is compared to the net asset value as at 31 Dec 2014 of 19.5 cents. However against the backdrop of whether Sinotel is a going concern, the report suggests that this initial discount to net asset value may turn out to eventually be fair or a premium to written down future net asset value. In this regard, Voyage Research has valued Sinotel at an intrinsic value of 5 cents.
GET TO THE POINT : Investors should look at the liquidity of the counter and decide whether this represents a good exit opportunity to avoid being stuck in what might become a private company.
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