Forum Archive Index - May 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Dick,


You addressed these questions to Winner, but just to satisfy myself 
that *I* understand what he has done, I'll try to answer your 
questions.



>
> 
>the figures you mentioned yesterday look a bit strange.
>BCH was selling for $8.25 at the end of Dec 98.The 2:1
>split was made in May 99. Just before the split, BCH was 
>selling for just over $10, and it droppped back to $5 
>after the split
> 
>




Remember that all BCH shareholders were given 1.56 BCA shares.

The chart is in terms of the BCA price.   So all of your BCH price 
recollections of history must first of all be divided by 1.56.  In 
addition a 1:1 split looking forwards will give you twice as many 
shares as you had before.   But if you look backwards, for every 100 
BCA share you have now, this translates to 100/1.56 = 64.1 BCH shares 
 (immediately before conversion to BCA), and 64.1/2 = 30.05 BCH
equivalent shares before the split.

So Dick, we must make adjustments to your bare BCH share price 
figures, so that the prices are expressed in terms of the equivalent 
number of BCA shares those BCH shares are destined (using our 
benefit of hindsight) to become.  If the number of shares is 
increased while the underlying business remains the same then the 
share price will fall to compensate.  Now all that remains is for us 
to find out by how much those BCH share prices you quoted must fall 
to compensate for the issuing of new shares.

Specifically using your figures and, working backwards:

Just after split, share price is $5.00/1.56= $3.21
Just before split, share price $10.00/(2 x 1.56)= $3.21
Dec 1998 share price is $8.25/(2 x1.56)= $2.64

These figures pretty well tie in with Winner's graph, as I see it.



>
>
> If you had been given 100 shares at Christmas 98 they would have
> increased to 200 at a cost of $4.12 each.
> 
>



So 100 shares at $8.25 go to 200 shares at $4.12?   That looks 
correct Dick.   Divide $4.12 by 1.56 (the post split BCH to BCA 
conversion factor) and you get $2.64.   Again that ties in very well 
with Winner's chart.



>
>
>If this is any help: Taking into account the extra shares BCH
>holders would have got, and the special dividend, and the phase of
>the moon, and anything else I could think of, the post-merger price
>in my case would have been $7.15 (if I had held on).
>
>



Presumably Dick, 'your case' is the same as the case of all other 
Baycorp shareholders, disregarding anything that might happen to you 
at full moon ;-).

The special dividend was 20c per share to all Baycorp shareholders, 
(equivalent to 20/1.56= 12.8c on each BCA share) was  paid in early 
December 2001.   Add this 12.8c onto your $7.15 and you get $7.28.

The data points on Winner's graph make the whole thing a bit blotchy 
in that area.  But as near as I can tell, $7.28 looks to be about the 
figure on Winner's graph.

Please post back if this isn't a clear enough explanation, as I can 
absolutely guarantee there will be many other people who don't find 
the drawing of this chart that Winner did at all obvious.  I like to 
think that as many people as possible understand what Winner did.



> 
> I sold out because of the PE ratios of more than 50%..they were just
> too high in all logic. The co has said it believes it can maintain
> 20% growth, although this still has to be proved. Under the PEG
> rating (which has come into wider and wider use in recent years)the
> PE rating would need to fall to 20 to make the co attractive...and
> it would still depend on being able to achieve the 20% growth.    
> 
> 


Interesting way of looking at P/E and PEG and the link between the 
two.  Would you like to explain to the group how the 20% growth vs 
the P/E of 20 tie up together?   Someone should probably put 
something on the Focus Investment Group about that.

SNOOPY






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