Valuing MDT purely on EPS basis is definately the way to go. Whether the earning are committed to debt reduction doesnt really matter, ie paying off the debt will result in higher NAV and lower future interest liabilities and therefor higher future profits.
Certainly I wouldnt expect a dividend anytime soon, though if property values improve and margins increase, I can see dividends being reinstated once a 50% gearing is achieved. How long term an investment that would be im not sure.
Its a tradeoff between capital gain and distribution. So the new improved MDT may or may not meet individuals desired inestment parameters.
quote--> EPN will participate in and be a sub-underwriter to the entitlement offer. Other substantial unitholders in the Trust will be offered the opportunity to participate in the sub-underwriting of the offer. EPN's final ownership level in the Trust will depend on the participation level of MDT's other unitholders in the offer and the extent of other unitholders participation in the sub-underwriting of the offer. <---- quote
From that statement I would expect they pay full price. If the offer ends up being at 6.7c and you chose not to subscribe fully, then EPN and other majors will take up the shortfall at same 6.7c price.
The only difference would be that underwriter usually get 3% fee on amount underwriten, so i guess technically a small discount. But more shares wont be issued, it just means funds raised minus fees equals slightly less funds at the other end to reduce debt.
Certainly EPN would be happy to snap up as many as available. When you think about NAV, EPN are getting about $40mil value for $9.5mil outlay. How wouldnt want more at those odds.
Quote---> Trading in the Trust's units will remain suspended until the conditions for the proposed Recapitalisation are satisfied to allow a PDS for the Entitlement offer be lodged with ASIC and the ASX <-- Quote
Trading should recommence this week. The condition precedence has basically been met. What do they need to set the ball in motion? -Macquarie sell 2.6% holding -> Tick -Macquarie sell management rights -> Tick -$9.5mil of shares(15%) issued, no vote required -> Tick
-Waiting on other mjor holders to agree to sub underwrite -Waiting to prepare a PDS
Both just formalities really.
Some people(day traders) got caught up in this TH, so might be keen to exit on open. But for the best part you are correct. If shares rise, then the uptake of the rights issue will be stronger. If the share price is weak then people will not participate and the company will belong to EPN and a few others.
In BBI/PIH case each holder got diluted 15000:1, so selling now is benefitial to after but that was offset by a capital return/special dividend.
In MDT case I believe the price you could sell out pre recap versus post recap will be very similar. I wouldn't run for the doors personally. Long term it may no longer suit your style.
By raising above last traded price they arent diluting your holding value, you will end up owning a smaller slice of a bigger pie.
However they are diluting your NAV or potential future value, this is because of the large gap between shareprice and NAV.
Many bought for the above reason and would find the new MDT less appealing.
The one thing I would look out for is a reconstruction of shares in the future. 4billion 6.7c shares is a lot. Perhap 10:1 to get it to 70c and 400mil on issue.
MDT Price at posting:
6.4¢ Sentiment: Sell Disclosure: Not Held
