Forum Archive Index - August 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

Thanks, George!

 

Come to think of it, some chatters would have thought at the beginning what a bore the exercise would be!

 

Not so! Continuing from your answer, that if there were an 18 cent rise in the price of an FFS share to 50 cent/ share, then the NTA of RBC would be $ 1.37. And at a 20% discount, the RBC shares could sell @ $ 1.10: 

 

At that stage a massive amount of cash will become available for a massive buyback, perhaps sufficient to drive the price up to $1.25.

Ignoring time and costs, that would be a return of about 56.25% on an outlay of 80 cents.

 

Greg's answer from Aug. 12, 2001, mentions that the same investor outlaying 80 cents on FFS shares also gets the same return!

He could get that return perhaps somewhat earlier than the RBC holder.

 

However, the longer holding RBC holder will still have the research division at a discount of ( 137-125) or 12 cents per share, assuming that the NTA of that division remained the same; chances are that this has increased in the meantime.

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It is also becoming clear that far from cashing in their chips in the present RBC buyback, the larger holders intend to wait for further developments and we can now see their reasons for doing so:

 

A potential 56% waiting for them on top of a large profit they already have!

 

The NZ$ has risen by about 4-5% since these holders acquired the shares. Another sweetener, albeit a small one!

 

Gerry  

Holds RBC.

Disclaimer: Readers are not asked to buy, hold or sell FFS or FFSPA or RBC shares. To do so, will be entirely at their own risk.