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| Subject: Hahaha 21/11/2002---interest savings notes.5733092 | |
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Author: $9,735,000---Oct 1 |
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Date Posted: 05:48:50 01/01/03 Wed http://www.stockhouse.com/bullboards/viewmessage.asp?no=5733092&tableid=1 ------------------------------------------------------------ In one of my previous posting, I have miscalculated the interest payable to the listed convertible notes holders on Apr 1 and Oct 1 from now till Oct 2005 as $7 million. The correct interest payment is $9,735,000 ($250million * 7.5% / 2) for each period. That is $18,750,000 (almost $20 million) per year. The total borrowing cost for the year ended 2002 is $29.7 million (inclusive of the above $18.7 million). One must understand the impact of interest payment (or borrowing cost) on ERG, as I believe this is the biggest problem (other than closing new sales) which ERG will have to face until its share price can go above, let us say, 2 dollars. The reason for the significance of this interest payment is as follows. ERG has been talking about EBITDA (i.e. earning before interest, tax, depreciation and amortization) positive for the coming years. It was EBITDA for the second half (repeat second half only) of the financial year ended 2002. We can ignore the tax bit in EBITDA as no profit means no need to pay tax (i.e. no money going out of ERG pocket). We can also ‘ignore’ the depreciation and amortization bits as they can be viewed as accounting jargon for money which have been spent in the past year. Although they look bad on the financial statement, they are not ‘real’ loses. The money which was lost/expensed in the past year is ‘spread’ across into the current and future years (i.e. no money need to go out of ERG pocket from now on). Looking forward, depreciation and amortization is indeed good for ERG, as they can be carried forward/accumulated and viewed as ‘tax credits’ in tax payment when ERG eventually make a profit in the future (that is provided if it survives the coming months). This leaves the interest bit in EBITDA for us to look at. And this is a real big big big problem for ERG. Because this is real money which ERG has to find each year to cover interest payment ($29.7 million last financial year). This is not the revenue money. It is the money which is left after expenses have taken out from revenue. ERG has sold its shares in EDI Downer for $40 million(?) during the past 12 months. During the past 9 months, it has spent at least $50 million of the money it raised for the Proton acquisition on non Proton acquisition activities. A few days ago, it sold ECard for $5 million. When it sold ECard, the market responded with a rush of sell order and a dive in ERG share price. The only way for ERG to raise more cash now, without further increasing debts and interest, is to continue to sell its joint venture business. But the problem is that if they continue to sell their joint venture business for only a fraction of the money they put in (e.g. spent $30 million in ECard and sold for $5 million), it will just trigger another round of market sell off. The market does not appreciate ERG telling them a one-sided story that they sold ECard for a $5 million profit above the book value of zero. The market knows all too well that ERG is hiding the fact that $30 million was poured into ECard just 2 years ago to get it started. [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| Re: Hahaha 21/11/2002---interest savings notes.5733092 | (29,702) Hahaha correct--few notes here---Stevo. | 06:29:30 01/01/03 Wed |
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