Listen up, traders. Accept the offer and you may miss out.
From a buy-and-hold perspective, CST is a classic case of an R&D company that has developed a successful product that meets a global need, and has strong IP protection.
It has only recently moved into the commercialisation phase and its unit sales are growing rapidly. Yes, the strong $A is knocking prifits, and will continue to do so. But with zero debt, low unit costs and a high gross profit margin, the product should nevertheless rapidly increase sales, making good and growing profits for several years.
Such companies are notoriously difficult to value and I have no doubt a valuer can be persuaded to justify $3.55. But that price does not reflect the blue sky that is achievable in the next 2 years.
If you stick a profit of say $20m and RRR of say 12% into the equation, you get an intrinsic value well above $3.55.
The directors are not serving shareholder interests by recommending acceptance of the offer.
CST Price at posting:
$3.30 Sentiment: Hold Disclosure: Held
