No problem at all. I sent them the following email and will let you know if I hear a response:
"Byron,
I have just read your research note in relation to Exco Resources (EXS).
As a shareholder, I appreciated you taking the time to analyse this company, however I wanted to discuss one important piece of the analysis that I believe is missing from your research note.
That is, whilst you have valued the company on the basis of post-tax cash flows from the CCP sale, you have made no mention of the value of the franking credit to Australia shareholders (and limited benefit for offshore shareholders).
If EXS does indeed pay $35m of tax as a result of the sale, then as Michael Anderson has publicly stated, they will pay $70m of the $100m distribution as a fully-franked dividend. That franking credit has a value of around 8c per share.
According to your method of analysis, if no tax was paid on the sale, then the company would have an additional $35m of cash and a pre-distribution valuation of 78c per share. However, there would be no franking credits to distribute in this scenario. As you would be aware, a 36c unfranked dividend has the same value to Australia shareholders as a 28c dividend franked to 70%.
Would appreciate hearing your thoughts on this."
EXS Price at posting:
64.5¢ Sentiment: Buy Disclosure: Held
