Mitchdon is right. The NAVs are inappropriate. Anyone you has built a DCF valuation model will tell you that the NTA is a function of a bunch of unprovable assumptions.Usually the participants in a transaction need to buy into the assumptions for the DCF to have any meaning. Auditors will use whatever whoever pays them says to use as long as they can point to some corroborating evidence. That evidence is not subject to any investigation or stress test.
In any case there will be a fire sale by the liquidator where the "alternative" is walking away. As happened or the 120mw unit at Sengkang. Or to the 50% of EEES that was transferred for nil (perhaps on the promise that the Bakries will fund gas field development). I do not take any heart there.
Even if the remaining secured/preferred creditors are paid (or EWI dos a deal with them), then he liquidation will be controlled by EWI. It is probable that EWI will make a play for the assets for a nominal sum and wrap it up with the liquidation.
However, there is a lever. That is that EWI is a related party, and now there is evidence that EWC offered security on a loan form a related party when it was unlawful to do so. This should put any liquidator on notice that the related party transactions require at least some investigation.
But should EWC go into liquidation, it is probably all over rover. The independent directors job is to secure the best possible run off as they can.
EWC Price at posting:
3.5¢ Sentiment: Hold Disclosure: Held
