the rights offer is not successful, and shareholders don't take up the new shares on offer? They need the funds to pay a R29m bridging loan. Now if they can't pay the loan, then I read somewhere that the loan amount gets converted into shares. i can't seem to find any clarity on this - anyone got any ideas?
Its not the dilution I am concerned about - it is the ability to operate as a going concern. i am trying to find out if FRT has any other conditions attached to the bridging loan, and wether they are relying on the rights issue to solely repay the loan, or whether they still need additional working capital.
Herewith my back of a matchbox calc: Prior to the current rights offer and the imminent placing of shares with Shoden, FRT had 258.2m shares in issue. Subsequent to the R20m offer and the conversion of the R29m loan facility from Shoden into equity at 3cps, issued shares will increase to 1,891.54m. Based on the F08 income statement with revenues of R1bn and an opm of 4.6% and allowing for the new capital structure, FRT's earning power comes to between R30m and R40m - equivalent to HEPS of between 1.5 and 2cps. Based on a PE of 8x, the share could thus recover to between 12 and 16cps, 1-year out. Whether this compensates for the financial risk and given many other lowly valued smallcaps without the same operational risks, is an open question.
that would be a 400% gain in one year,but my sentiments are the same. I am only taking a small punt on this one, but I have a strong gut feeling, I think they have the right product mix, good BEE (and strategically placed BEE) and good enough client base. Their problems are operational, which hopefully a stronger mangement team can sort out. Worth a punt, IMO