Hankore RTO A Deal Between Compatriots? Since the RTO deal with CEI was announced I had received repeated recommendations to buy Hankore for its improved prospects riding on CEI coat tails. I used to trade quite heavily in the counter but following the deal I had steadfastly refrained from doing so. Had I gone long immediately after the announcement and then continue to do so after each successive recommendation in the hope of a rebound, I would be worse off by a 6-figure sum! I had never seen a more lop sided deal in my career doing companies reorganization and restructuring, my mundane record with investing and trading the market notwithstanding. The deal is like is a marriage where the bride brought the groom into her home, subjugate her modest status to him on account of his much vaunted pedigree in return for a present day projection of a happily ever after. My interpretation of the deal is as follows: - what CEI gets are: immediate, definite and very substantial - what Hankore is baited with are: distant, uncertain and indeterminate The premium CEI receives represents many future years of earnings received in advance. The discount Hankore gives is payment in advance for the expectation of savings in interest payments by Hankore thru better borrowing terms because of the pedigree of CEI. As to whether Hankore will benefit from securing more and bigger projects thru the SOE connections of CEI it should not be taken as a certainty given CN announced policy to reform the economy and the ongoing anti corruption drive. Either or both of these events can produce outcomes in the future that are not within our current imagination. Dukang is a case in point, dropping by 2thirds due to the anti corruption drive. In closing, I can say that, personally, my regard for those personnel in Hankore who negotiated the deal has been severely diminished and consequently as does my regard for the company. I do not see myself touching the counter for a while unless the terms of the deal are renegotiated.r
Posted on: Mon, 30 Jun 2014 02:17:52 +0000
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