re: cmq-looking very cheap?? really? Mika, My post on oze was...

re: cmq-looking very cheap?? really? Mika,
My post on oze was rightly corrected by another poster. I will repeat the post here to show you CMQ is not cheap at $0.50

Jess, thanks for correcting me. For easy reference & valuation, let me put my post & yours together.

What is the value of CMQ shares? Existing CMQ shareholders and potential investors SHOULD READ the conclusion reached by KPMG who was commissioned by the CMQ board in 2005 (refer ASX 18.02.05). On page 80 of the 104 page document under the heading “ Potential value of a CMQ share based on the Company’s Internal Cash Flow Analysis” KPMG’s definition of “Worst case scenario” is:
This scenario assumes minimum capital capability available to the company, sufficient only to support an expansion of manufacturing capacity to 50TPA. The worst case scenario also assumes a significant scale back in operations and delays in receiving the requisite regulatory approvals and hence market acceptance of CMQ’s products relative to the base case.

KPMG concluded at 11.13 : On this basis the low and high conversion price of the Tranche 1 Bonds can be argued to represent a premium to the potential value of a CMQ share to the Base Case, Downside Case and Worst Case.

In simple language, KPMG’s concluded that the low bond conversion price ($0.60) represents a PREMIUM to the potential value of a CMQ share to the Base case, downside case and worst case.

Many investors may argue the CMQ situation today is worst than KPMG’s Worst Case Scenario by arguing the following:
1) Is CMQ’s current capital capability sufficient to support an expansion to 50tpa? CMQ now expects to achieve 100% name plate capacity (20tpa) in the 2nd Q of 2006. Liquid assets (Cash) on 31/01/06 is $39.1M and CMQ is required by the bond holders to have in excess of $24M at 30 June 06. The cash burnt rate was Dec ($2.83M) & January ($2M). At this rate of cash burnt, how much capital is available for expansion of production to 50tpa, that is assuming CMQ achieves 20tpa! On 2 February David Williams announced he “is VERY CONFIDENT” to achieve 20tpa before 31 Mar 06. The recent announcement said “Have reached the stage where we are comfortable that 100% nameplate can be achieved. 100% nameplate now targeted for the second quarter of 2006”.

2) Is it a fact that the requisite regulatory approvals have been delayed? (Refer to CMQ announcement on 1/03/06)

3) What is the market acceptance of CMQ’s products? Where are the sales and sales receipts? Is this worst that the KPMG scenario?

Is the KPMG report commissioned by CMQ more reliable than any other report (example AEGIS)?

I was wrong and Jess rightly corrected my post:

Chemeq is in a far worst situation now then the time KPMG did the valuation.

In January 05, Chemeq had $9.919 million cash and no debt with 65 million shares issued. This was equivalent to $0.14 cash in the bank per share. In January 06, Chemeq is under the water by $21 million ($60 million convertible bonds debt minus $39.1 million cash). There are 101 million shares on issue which means a debt of $0.21 per share. The valuation of Chemeq shares should be –

$0.60 (As valued by KPMG with a premium) minus $0.14 cash in the bank per share minus $0.21 debt ($21 million divide by 101 million shares) = less than $0.25 per share

Well done Waratah for comparing Chemeq to Enron, is that where you think Chemeq is heading to? Why not show us your calculation on how much you think Chemeq is worth?

Regards,
Jessie Adams


Come on, CMQ Spruikers, dispute what is wrong with the above valuation. Remember KPMG was paid by CMQ to do their valuation.