good business sense?

There are a number of indicators suggesting that such an extreme farm selloff by Asciano may not be good business sense:
-Since the extremely low point of 40c in March, Asciano’s SP had risen several fold, before there was any suggestion regarding what shape the monetisation process may have taken. This culminated in a price of $1.83 just prior to the announcement of this cap raising.
-The institutions have been all over this offer, allowing the total cap of the second offer to be raised from 1000 mil to 1350 mil.
-The Australian share market has bounced back some 28% from its low point and although corrections will no-doubt occur, there is general consensus that we will not return to this low point, and there is also general consensus that the market will generally stabilise and improve over the next few years.
-Asciano has announced positive news regarding new customers and increased business and new contracts are due to commence this year.

With all these positive indicators, is it logical to sell the farm when Asciano’s share price is still so low? With 2.? Bil during 2010, and the balance not due until 2012, why not use the initial raising of 1 Bil to pay down the 2010 debt, and negotiate extending the balance until 2012. This would provide near term certainty, and provide breathing space for the anticipated global improvement on the economic front, and subsequent increase in Asciano’ share price.

12 to 18 months of reasonable trading with no debt due until 2012, could potentially result in SP of $3-$5, and in an improving market, this would provide the opportunity for a second (and more equitable) cap raising that could potentially raise 2.5 to 3.5 bil (not 1.35 bil).

This could be used to pay down debt to a comfortable level, and perhaps to look at buying additional quality infrastructure assets.

When the market is down, you should be buying assets, not selling them or increasing the number of shares by 400%. This whole fiasco is based on the wrong premise and shows a lack of leadership and zero vision for the future.

John S.


Vote No.