dangerous times become active, page-2

I posted this reply on SS, but as some people here dont read SS.. i have reproduced it here.

Dangerous yes… and its also opportunistic, cunning, and potentially lucrative.

If you believe that BilltoBill will become cash flow positive soon and the sp will reflect this… IMO this will not change in the new arrangement. If anything; it may happen quicker.

Can anyone really value Indian real estate? Of course they can. Just bc its in India doesn’t mean anything. From what I can gather, it’s 200 acres of commercial land. And they have stapled the real estate with equity in VCI to raise $16m to gain cash out of the asset. I have no issues with that. Rao needed cash, and being the ex-head of Infosys Australia, would presumably be very highly regarded in India. Hence a large investor wanted to get on board, and used the basis of his wealth (real estate) to get on the board and a shareholding in VCI

Now this is what we know/don’t know.

1) This is clearly a back door listing for VCI. No problems with that.
2) So in order for that to take place, there needs to be a deal that is win win for both OCO and VCI shareholders
3) The transaction will be for up to $40m
4) The NTA of VCI is at least $40 (just purely on the real estate, which has been growing at 30% a year).. and not taking into account all the infrastructure required to maintain 700 employees.. and also the goodwill associated with the business.
5) Up to $40m worth of OCO shares will be issued to VCI shareholders. At this point in time it appears like a lot of dilution.. but we are not sure what we are getting at this stage for that dilution, in terms of revenues, profits, growth, clients etc etc
6) We don’t know at what price the placement will be done at. Will it be 5c or will it be 10c?
7) With VCI being a private company that Rao formed. I would say the number of shareholders wouldn’t be that great, and this will result in a pretty consolidated share register once the deal is done
8) In terms of board changes.. I would say that Hans Moser would be going (no need for him anymore), and maybe Stephen Lucas. Im sure Martijn will remain as BilltoBill is still an integral part of this whole business, and I would assume Andrew Metcalfe would remain CFO



What the company needs to do IMO is put out something to the market explaining that

a) Martijn is staying (it wasn’t clear from the announcement)
b) Some high level comments on the expected synergies (im sure VCI’s presence in India is one of them)
c) The commitment to the BilltoBill business isn’t changing


Now lets think about this. Martijn and Yang own around 20% of OCO. For them to have their share of BilltoBill’s success diluted quite significantly indicates to me that what they are getting in return will be far superior.

VCI have been on a sharp acquisition path in the last 12 months, and the added visibility that will be created by them becoming listed may result in a new wave of shareholders and investors into the merged company

Personally, im going to reserve judgement until the DD period is concluded and more information is released.

Cheers
Livas1