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26-03-2020, 11:27 AM
#1441
My understanding is that if it is reasonable to believe that profit would be impacted by 10% or more in any year, (so we are talking about not just the current year) but also next financial year that constitutes a material adverse change.
Obviously a cessation of their development program for a material amount of time in the current year is going to have material effect on the number of settlements they can achieve in FY21 and I reiterate that I think this deal is over.
What is fair value for an underperforming company with very average management in the current environment ?
To answer that we need to look at the low point last year of ~ $4.20 before Covid 19 and then extrapolate down from there based on the average decline in other listed operators in this sector.
I think its a long way south of $4.20 and if better managed OCA is trading at about 60% of NTA, maybe half NTA is fair for MET ? $3.50 is my assessment of fair value.
https://www.nzherald.co.nz/business/...ectid=12320007
Last edited by Beagle; 26-03-2020 at 12:01 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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26-03-2020, 02:47 PM
#1442
Originally Posted by JohnnyTheHorse
You guys need to refer back to the SIA. Material Adverse Changes are:
1. NTA drop by >$100m
2. NPAt drop by >10% of forecast
Most notably these cannot be because of "changes in general economic conditions, the publicly traded securitiesmarket in general or law" provided that "such matter does not have a materiallydisproportionate effect on the Target Group".
So the first question is will NTA or NPAT drop to trigger it? If yes, has the general economic conditions had a disproportionate impact of MET?
...
First whiff of a cross-infection of a resident by an employee, will they be triggering the ejector seat?
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26-03-2020, 03:09 PM
#1443
Material Adverse Change means any matter, event, condition or change in circumstances or thing which occurs or is announced, and which is not an Excluded Event, (each a Specified Event) and which individually, or when aggregated with all other Specified Events, reduces or is reasonably likely to reduce:
(a) the consolidated net tangible assets of the Target Group taken as a whole by at least NZ$100 million; or
(b) the consolidated underlying net profit (including non-recurring items and calculated using the same accounting policies and methodologies of the Target Group in place as at the date of this agreement) of the Target Group in any financial year (in the FY20F year, being as set out on page 49 of the management presentation dated 4 December 2019) by 10% or more against what it would reasonable have been expected to be but for the Specified Event(s);
provided that such event, condition, matter, or change in circumstance is not the result of:
(c) a matter, event, condition or change in circumstance, to the extent that it was fairly disclosed to Bidder in the Due Diligence Materials or by Target through the NZX market announcements platform two Business Days before the date of this Agreement;
(d) done or not done at the written request or with the written approval of Bidder;
(e) resulting from the actual or anticipated change of control of Target contemplated by the Transaction;
(f) resulting from changes in general economic conditions, the publicly traded securities market in general or law; and
(g) resulting from changes in generally accepted accounting policies or the judicial interpretation of them,
provided however, that with respect to clause (f), such matter does not have a materially disproportionate effect on the Target Group;
Because I am already bored out of my mind I will play commercial lawyer, (like playing charades only more fun).
Reasonably likely circumstances taken as a whole to reduce underlying profit in any year, (I read that to include forward projections for FY21 year and or the FY20 year), by 10% or more.
Taken as a whole in terms of impact on FY21 would include considerations on
a) How real estate values might soften in the foreseeable future
b) How the slow down in development activity presently being experienced might impact sales of new completed units in FY21
c) How the general effect of the virus and its effect on the villages might make people less inclined to buy a new or existing unit in MET which might reduce their new and used unit sales in FY21.
The term reasonably likely and the quantum of 10% are not high bars. I think any reasonable person would think its reasonably likely there would be a material impact on FY20 and FY21 profitability and therefore I think its highly likely this is all over.
Now...the question is, these institutions who have been positioning themselves for either an arbitrage play or in the hope of a better offer, what are they going to do if and when this deal is formally cancelled ? How many will ride it out or cut their losses and run ?
Share price is already in the toilet, how much lower will it go ? That's the $64,000 question ?
Last edited by Beagle; 26-03-2020 at 03:17 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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26-03-2020, 03:12 PM
#1444
Originally Posted by Beagle
Because I am already bored out of my mind I will play commercial lawyer, (like playing charades only more fun).
But the ‘jury’ seems to have made their mind up.....share price close to half of offer price
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
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26-03-2020, 03:20 PM
#1445
Originally Posted by winner69
But the ‘jury’ seems to have made their mind up.....share price close to half of offer price
11 of the 12 members have...before I gave the closing argument ...probably just like in a criminal trial eh
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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26-03-2020, 03:28 PM
#1446
But is this resulting from changes in general economic conditions Beagle? That's where things get murky.
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26-03-2020, 03:30 PM
#1447
Originally Posted by JohnnyTheHorse
But is this resulting from changes in general economic conditions Beagle? That's where things get murky.
Hmmm...you have a good point. I'd better stick to my day job (A beagle would look stupid in one of those high court wigs anyway lol)
That's about as clear as a hot Rotorua mud pool
Looks like the jury has already made up its mind though.
Last edited by Beagle; 26-03-2020 at 03:33 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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26-03-2020, 03:53 PM
#1448
Originally Posted by JohnnyTheHorse
But is this resulting from changes in general economic conditions Beagle? That's where things get murky.
Perhaps they could argue that an epidemic is not an economic matter but is actually a health matter, which has an impact on NTA and NPAT greater than 10%. That would enable them to trigger the escape clause. For example a a sudden rise in infections in MET facilities could see far fewer sales and Profit levels decline by more than 10%. It would be irrelevant if SUM and RYM also faced the same decline as the issue is primarily a health matter, and not an economic one.
The government's response to the epidemic may also have an impact on general economic conditions and profitability exceeding 10%. But that in itself would not enable them to trigger their escape clause.
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26-03-2020, 04:15 PM
#1449
Originally Posted by Bjauck
Perhaps they could argue that an epidemic is not an economic matter but is actually a health matter, which has an impact on NTA and NPAT greater than 10%. That would enable them to trigger the escape clause. For example a a sudden rise in infections in MET facilities could see far fewer sales and Profit levels decline by more than 10%. It would be irrelevant if SUM and RYM also faced the same decline as the issue is primarily a health matter, and not an economic one.
The government's response to the epidemic may also have an impact on general economic conditions and profitability exceeding 10%. But that in itself would not enable them to trigger their escape clause.
yeh exactly, proximate cause - the event- is the Pandemic, not the general economic conditions which are a result of the pandemic, and that allows them to claim the 10% lower profit figure which will easily occur
I don't think they need a cluster of infections either as you imply
So they can trigger the MAC
For clarity, nothing I say is advice....
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26-03-2020, 04:49 PM
#1450
I really feel for MET holders..what a ride.
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