Afex how do you see high 20s on a technical basis? Theoreticaly,...

Afex how do you see high 20s on a technical basis? Theoreticaly, in an "efficient market", the price should correct to 33.5 tomorrow on open to account for the decrease in value of the company brought about by the reduction in cash via the dividend.

The market depth on close was very solid however I understand that all buy and sell orders are purged following the close of trade on the day before ex-dividend.

For mine, the price will be driven down by those traders that need to cash in on the trade tomorrow. The increase in the share price following the announcement was not massive so there is not a massive return to be achieved by those traders that bought in after the declaration date. For instance if a trader bought in at the lowest price of 44 cents on the delcaration date of 28 March 2010 then if he sells at 33.5 cents then he experiences a capital loss of 10.5 cents a share and a return of 15 cents a share, which equates to a net return of 4.5 cents a share or a simple return of about 10% (on a per annum basis this is obviously much greater).

The higher the buy in price the smaller the return. Also if they bought in after 28 March 2011 and sell on ex dividend date then the tax efficiency of the fully franked dividend is potentially compromised depending on the size of their trade and franking credits obtained in other trades over the course of the year.

The question is how many recent traders want to cash in on their 10% or less return tomorrow. Obviously there could be a decent volume of traders that bought before the 28th at amounts below .44 so this batch of traders will be increasingly more prepared to sell at .335, with the preparedness increasing inverse to the level below 44 cents at which they were able to purchase their stock.

Since the 28th the daily volume has been much greater so you would expect there is a materialy greater number of traders in the position of capitalising on a 10% or less return than the category of those traders that purchased prior to 28 March at levels below .44 cents. This arguably may lighten the sell pressure?

Moreover, there may be less pressure on the price given that two fundies own a big stake of the company and given their previous comments are unlikely to be offloading on the ex-div date. Moreover I think Orbis seems to think that even post special dividend the company is worth a lot more than 33.5 so you potentially could see them come into the market to soak up more stock at these levels.

My money is on the share price opening at around 33 cents and settling between that price and 36 cents at the close of trade tomorrow. Any higher than 36 cents and I will be very happy.

Time will tell.