NGL<-->bluechip

[zyreon]

http://www.bluechip.co.nz/
http://www.nzx.com/market/security_details/by_security?code=NGL
http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=3572123

Hmmmmmmm

a former bankrupt and a former ...quasi-bankrupt attempting to list a company which operates in an industry where; should interest rates continue to rise (inter alia), shall face possible deflationary pressure...

might be interesting to observe.

[wsheridan]

kooks well dodgey zyreon .... it's a shame the Herald piece didn't include an opinion column telling people to stay clear

[zyreon]

Regardless I attempted some analysis:
Taken from the independent report

NTA per share post-acquisition: $0.105
EPS post-acquisition: $0.102

Shares issued to bluechip shareholders: 50,000,000
result of share consolidation to NGL shareholders: 2,500,000

Now a question may arise: Is there any scope for arbitrage?

Answer: depends on your expecation of the PE of bluechip when the new shares are issued.
The way I see it currently to buy a share in bluechip via newcall on the market you have to buy aprox. 72 NGL shares to do this, which implies a current cost of (72*0.02)= $1.44 which given the EPS of 10.2 connotes a PE of (1.44/0.102)= 14.12

Therefore given the above assumptions to produce profits by buying pre-acquisition you would be expecting a PE of bluechip of more than 14.12

If you are a bluechip shareholder you will be delighted in the implied acuisition price per share of $0.10 (50,000,000/5,000,000) [i.e. shares issued to bluechip shrs/net assets]
This implies a PE of (0.10/0.102)=0.98

Other factors:
ROE = circa 100%
misleading as bluechip appears to be largely a service organisation.

Incidentally, the announcement to the exchange includes a profit figure of $9m this is misleading as it is EBIT, the NPAT is closer to 5m

Good Luck!