It has been stated by RHI that the company, among other things, intends to commence paying dividends once the initial capital payment is received. I have been wondering what this might mean as it significantly impacts the current value of our holdings.
My expectation is that there will be an immediate special dividend. That is a simple way of getting a benefit to shareholders. I realise that share buybacks are also mooted. The latter are more complex eg. on-market vs off-market etc. I think there is a recognition at the company that long-standing shareholders deserve a quick reward. I am anticipating a substantial fully franked special dividend will be paid quickly. What is substantial? I'm thinking perhaps $1.50 per share. A dividend of that amount would consume around $90m of the after tax cash payment which will be circa $156m and still leave the company with $66m of cash for ongoing activities and future developments.
Given there is another circa $150m net cash payment in prospect maybe 2 years from now, I believe that is quite a realistic scenario and puts into stark relief the low price shares are currently "trading" at. I put the word trading in quotes as I do not believe we are seeing anything like a liquid or transparent market right now.
regards DF
RHI Price at posting:
$3.90 Sentiment: Hold Disclosure: Held
