looking back at the USB paper on SDL back on August 2011, it makes for an interesting valuation based on current metrics.
In that paper, SDL was valued at $1.18 EV/T (based on a SIA price of $0.50) which was a 47% discount to the average EV/T which existed in the IO sector back them. But I will use the current SIA price of $0.57 so the implied EV/T is $1.42
Overlaying the current contained tonnes of 1.815Bt of IO, which is a 53% increased over the previous published figures, you get an implied value of $0.87, again a 53% increase. One would suggest that the entire 53% increase in EV/T is not achievable based on the current market sentiment and would not necessarily translate into a 53% higher SIA price.
This revised EV/T of $1.42, and the subsequent implied value of $0.87, might be somewhat watered down by the price of IO going down in the corresponding period. Back then the price was $177 per tonne for 62% fines, and now it is $136 per tonne. Which is a 23% reduction in price of IO. The combination of resource increase of 53% offset by IO price reduction of 23% and you can suggest that straight mathematical calculation might imply a SIA price of $0.74.
An alternate view is to calculate what the current EV/T is based on the higher contained tonnes (compared to the current TO price of $0.57) and you get $1.672Bn / 1.815Bn tonnes for $0.92 EV/T which is a 54% discount the the original SIA price. So upping the SIA price by 54% implies a SIA price of $0.88.
I cant see the SIA price going down, but I can see it going up.
I recall that the Independent experts report is made available to Hanlong 3 or so weeks prior to the other shareholders seeing it, so that it can see if, all things considered, the price of $0.57 is fair and reasonable. If it is not, then one would imagine that Hanlong might up the bid to be within the range stated in the IE report, and the CP would ultimately be satisfied without hanlong airing its dirty linen in public.
Although on this point of fair and reasonable, I would imagive that E&Y would say that, in the absence of an alternate offer, $0.57 is fair and reasonable, however should there be multiple interested parties then a higher SP range would be fair and reasonable. And $0.88 might be at the higher end of the spectrum, and indeed $0.74 could be at the lower end.
This is also worth noting punters, any upping of the bid by hanlong by 10 cents per share only equates to $293m, out of an all up spend of $6.4bn ($4.7bn plus (say) $1.7bn) or a 4.5% increase.
Like I said, flip them the bird. Actually, flip them 2 birds.
IMO.
HB
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