Despite some underperforming trusts, and despite negative sub-prime sentiment, to date there is no news available which would permit an intelligent investor to conclude that AFG's overall earnings are going to be materially lower this year than last year. Indeed, all the signs are that AFG's FY08 earnings will be higher than FY07. And FY09 is looking better still (if you can believe management when they say that Rubicon will be EPS positive going forward from FY09).
Having said all this, there is one of item of concrete negative news, viz., a widespread consensus amongst analysts that AFG is about to pay too much for Rubicon.
I propose that all shareholders reading this thread contact Christine Bowen, AFG's Director of External Relations, and tell Christine that you will be voting against the purchase of Rubicon unless the directors lower the price. Because the Rubicon deal is a related party transaction, in the current climate, if enough shareholders voice this opinion ahead of the Dec 12 EGM, then directors just might act.
The price of Rubicon is the key negative for AFG as far as analysts are concerned, so if AFG management were to lower the effective purchase price (in one form or another), this would remove a large chunk of negative sentiment and likely put a rocket under the share price (quickly pushing it above $8). Because of the rising share price, David Coe and Gorden Fell would likely end up making substantially more money out of a cheaper deal than they would out of the current deal.
At the right price, Rubicon would be a major positive for AFG, so I'm hoping it does go through. But the key issue is price.
Christine Bowen's contact details:
P: + 61 2 8916 7739
F: + 61 2 8915 7826
E: [email protected]
Long term, AFG's sp will not reach fair valuation ($12) until the credit-crunch issues have begun to dissipate. Most experts expect the credit-crunch issue to continue to drag US banking stocks at least until Q208.
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