Stealing Food

Source: memecenter

So there's this crop nutrition and protection company called Zagro Asia that's being taken over by the management for $0.30 a share. I bought Zagro in Sept 29 at $0.24 a pop, hoping for an MBO and I got exactly what I wanted, except I didn't.

 Let's start from the beginning, my thesis on why I was hoping for an MBO. Doing some basic due diligence on its financials, the numbers are quite attractive:

 It's NCAV (Net Current Assets Value) per share is around $0.22, whilst it's NTA (Net Tangible Value) per share is a whopping $0.35.

The margin of safety on this stock, even buying it now at $0.29 is still present if not for the ridiculous takeover offer.

 Its EV/EBITDA multiple is a dirt cheap 4.91x, and PE multiple at 8.96.

 It has a fair return on equity of 8.39%, with near minimal dilution in its share float over the past 9 years. Conservative dividend payout ratio of roughly 40% of its earnings on average over the past few years, and a fair dividend yield of 3.33% (using $0.30 as the price).

It's been reporting disappointing earnings recently, with margin compression starting from 2013, that pushed the stock price of Zagro down (and rightly so), which enabled the management to accumulate more shares (smart):

 Mr Poh and Mrs Soh have collectively been accumulating Zagro stock over the years. Their latest transactions were 8000 shares at $0.25 back in 27 August 2015. This seems little but their May-June transactions in 2014 represented 8,197,000 shares bought at an average price of $0.305. Before the buyout offer, their total share ownership stood at 66.72%. They only need 9% more to reach the 75% threshold.One must assume that they've accumulated much more now on the open markets after the announcement.

So, Zagro isn't exactly an explosive growth story, it's still an attractive company that's too cheap to not notice.

 Here's my problem then: Zagro's management have tried to steal this company before, at a more ridiculous offer of $0.15 when the stock was TRADING at $0.24 back in 2012. It is no surprise that the minority shareholders shot it down, and it's time for us to shoot down this ridiculous offer again. Whilst I understand that the management is smart trying to buy its own company wholly for cheap, they forgot that they have other shareholders they have to listen to and please. I mean c'mon, at least buy it out at its NAV, so it won't look so ridiculous to us and would entice more minorities to vote with you.

 I wonder what in the world the independent directors will be doing, perhaps nothing as usual as this is Singapore. Don't steal my food. I'll be voting against this.