Share price predictably off today with the announcement of an...

Share price predictably off today with the announcement of an equity raising. The question is whether holders should sell or take up their entitlements under the 1 for 3.25 offer at 50c.

AUO is saying that the first half will be poor and lists a number of reasons why. They make a big point however of stating that the second half will be very strong and forecast $15-18m after tax profit for the full year to 31 December.

At a share price of 60c, the AUO market cap is $97m. The equity raising will bring in $29m (pre costs). Using the lower end of the forecast profits range of $15m, this implies a full year p/e of only 8.4x.

Given that the profit for 2004 is mostly (only?) coming from the second half, the real ongoing p/e might be only about 4-5x.

My conclusion then is that the AUO story remains very attractive - I will take up my entitlements.

Good investing!