Ann last week that PRG a company about 10% smaller mktcap than SKE has offered to TO SKE at $1.38 arguing it is about 16% above recent SKE SP. SKE SP fell from its recent peak of $2.79 in early Sept to $1.06 on Dec 17th. That's a fall of 62%. Whilst no one picks the bottom should followers of SKE suspected company was likely to receive a TO?
in my experience when a SP plummets on no or little news it means bad stuff is lurking. SKE issued a 'market update' on 8/12 stating earnings for 1HFY15 would be similar to that of prev 6 months. Yet SP continued falling from prev day's close of $1.51 bottoming on 17/12.
Meanwhile on HV under the title 'TA-majorly oversold=bounce coming' many posters felt SKE had fallen way too far and had become exc value and a strong buy. In hindsight they were clearly right and some have done well. Vols were exceptionally high during the month of December with several days exceeding 5m!! So there was plenty action.
Question is: Should we (followers of SKE) have seen the TO coming? I certainly didn't anticipate it but entered this stk for first time at $1.145. My rationale was that
A) MS companies are facing a crap macro but selling on ASX has become indiscriminate.
B) Many MS companies have been subjecting to short selling from major players and with small mkt caps/low vols the effect on SP is very substantial.
C) Based on company update and the current financial fundamentals the SP below $1.15 was very good value.
I wish i had waited a day or 2 and would have got in about 6cents cheaper... but i have to place order night before mkt opens. Either way i try to buy stks when i see a significant discrepancy between the facts (as we have them) and the value placed on company by mkt. Does it always work? No... because unknowns can suddenly come to light providing a different take on situation. But this SP collapse took place despite re-assurance from board of SKE and imo lessened the risk considerably.
What will SP do from here? Who knows but weak POO does affect earnings of SKE and can't be ignored. My best guess in SP will stay in $1.42-$1.65 range until interim ann lateish Feb or further update. Hold.
SKE Price at posting:
$1.47 Sentiment: Hold Disclosure: Not Held
