Hi Jimmy - interesting alternativesMy thoughts are that PRY are...

Hi Jimmy - interesting alternatives

My thoughts are that PRY are already close to the 20% so they are limited in what they can buy on market. Purchases in the last month are in range of 5% of total shares which is well above the creep provision (I think 3% per 6 months?), so someone else is buying up.

I think some other institutions might be loading up with a view to selling into a takeover offer. I think the carrot may be the $25m of franking credits VEI has. This is enough to allow a take over offer at say 80-90c which would be predominantly a fully franked dividend, giving effectively another 30c bonus for low or non tax paying groups such as super funds. LICs (eg WAM) also like them because it makes it easier for them to pay fully franked dividends to their shareholders.

I don't think insider trading is a possibility as the reporting cycle has reached a point where draft accounts would be available to management and VEI has just confirmed earnings to be in the range of 11-12cps for the full financial year. In terms of where VEI is at the moment, with a very large debt, 5 times eps, that is 60c per share, is probably fair value for the shares.

I would hate to think that an issue is upon the horizon. To make a significant impact on the bank debt, it would need to be a 1:1 and at say 40cps, it would smash the gains over the last 6 months, leading to a very poor take up.

So although I would rather see VEI survive for another 12 months and lead to earnings of 14-15cps (as the bank debt decreases and turnover increases), I think the vultures are circling