S$0.20-CESS.SI
With reference to the previous statement dated 13 Aug ’11 where management said that they are in the process of finalizing the refinancing of the HK$250mln zero coupon guaranteed convertible bonds (CB) due 2011 and that the refinancing was expected to be concluded within 2 months (13 Oct ’11), in an update announcement, management said that the terms of the refinancing agreement are currently still being discussed between Morgan Stanley (the key CB holders) and they will make appropriate announcements on further developments in due course.
In addition, the company is also in the midst of preparing the agreement with DBS on the term loan facility of up to US$40mln maturing end Dec 2013. The availability of the facility is subject to the completion of legal documentation and fulfilment of conditions precedent.
We note that based on the company’s previous update provided on 29 July ’11 where the agreement with DBS was supposed to be finalized by 29 Aug ’11, we believe that the delay could be attributable to the current global financial crisis as well as their agreement with Morgan Stanley with regards to their CB.
The company’s current cash on hand of Rmb797mln is just enough to cover their CB and borrowings. If they have to repay their debt obligations immediately, they would not have enough for working capital purposes.
For 1Q ended June ’11, the company made its first ever loss of Rmb4mln versus profit of Rmb18mln a year ago and Rmb35mln a quarter ago. Even during the depths of the last crisis, the company still remained profitable on a quarterly basis of about Rmb7-8mln.
At 20 cents, the stock is currently valued at 0.28x price to book versus its low of 0.16x during the last crisis in early 2009, when the stock hit just under 10 cents.
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