mul announcement, page-11

re: broker report says worth 37 to 56 cents Hi OJ,

I have already posted separately on MUL (in reply to Yak's posting which includes a copy of the report).

In that post, I have queried Findlay's treatment of the iPStar satellite threat which appaers to have been understated in the report.

That said, it is also worth noting the choice of language used in today's announcement:

"Important Independent Corporate Research

Multiemedia Limited is aware of a valuation of the company prepared by Findlay & Co Stockbrokers Limited....Please note that the report was prepared from
information available to the market at large".

What was not stated in the announcement was the following:
1)
Tomorrow's GM which is (amongst other things) to approve the ratification of past share issues, as well as the terms and prospective conversion of the $3.5m loan announced on 20th August.
2)
The nature xof the connected relationship with Findlay.
3)
The fact that the $3.5m loan was arranged through Findlay (therefore, query the spin on "independence" - of the research, maybe, but not necessarily of the relationship).
4)
The terms of conversion.

On 20th August, I posted some concerns regarding the loan which, I considered at the time, was likely to be convertible "at 15% discount to the weighted average share price in the 5 trading days preceding the General Meeting (ie: indicative share price randing towards 6c)" and would likely involve the capitalisation of interest payments.

On 21st August, some of these concerns were addressed when MUL clarified its position, noting:
1)
interest @12.5% (which is 700 basis points above the risk free rate of return);
2)
convertible @25% discount to the weighted avergae trading price in the 21 days (ie: 1 month) preceding the date of conversion;
3)
a minimum conversion price of 5c; and
4)
automatic conversion on 29th October 2003 (if this has not occurred beforehand).

If tonight's close of 8.2c is maintained, then the conversion price will be 6.2c. With capitalised interest of ~$87,500 to be added in to the equation, the resulting conversion will involve $3.5875m being converted into ~58m shares which, based on the 2c differential, would return a gross gain of $1.157m (or $1.2445m) to the investors.

Effectively, based on tonight's close being sustained through to conversion, Findlay's clients will earn a gross payout of ~$1.25m for little more than 2.5 months worth of investment. Rather than being a headline interest rate of 12%, the effective "investment cost" of the $3.5m loan is closer to 36% (35.6%).
2)
capitalised interest, also convertible into shares (query, the loan has been announced, but at what interest rate?); and
3)
may well require a further General Meeting to be held later in the year in order to further ratify the proposed loan /share issue.

Despite these concerns, chances are the stock will again run tomorrow because few people like delving into the details (although, if it all goes wrong, they'll all scream "blue murder"). As other posters have stated previously - "buyer beware" and "always do your own research and homework".