Based on a £40m cash return and 145.25m shares in issue, this means that if every shareholder tenders his allocation in full then 41.66m shares, or 28.69 per cent of the share capital will be purchased by the company at around 96p each. LMS net cash increased from £35m to £47.4m in the third quarter, a sum equating to 34 per cent of its net asest value of £139m, reflecting disposals made since the June half year-end. In effect, LMS's board is returning 84 per cent of its cash pile.
To show how this works in practise, if you purchased 10,000 shares at a cost of £7,200 a fortnight ago, then you can expect cash proceeds of £2,754 from tendering 2,869 shares. At the current market price of 78p the balance of your holding is worth £5,562, so in effect your investment has increased in value by 15.5 per cent from £7,200 to £8,316 in less than a fortnight. Or put it another way, the company’s share price would have to fall below 62.3p post the tender for you to lose money. That’s clearly not going to happen given that it would mean the share price discount to spot book value – LMS’s net asset value has since increased to 97p since end September – would have to widen from the current 19 per cent to 36 per cent.
My advice here is simple: tender your full allocation pro-rata with the above worked example. Results of the tender offer will be announced on 15 December and cheques will be sent out on Monday, 21 December, so expect a cash windfall in time for Christmas.
Please note that for a limited period of time, my book Stock Picking for Profit is being offered for sale at a promotional price of £11.99 plus postage, subject to availability, full details enclosed below.
MORE FROM SIMON THOMPSON...
I have published articles on the following companies since the start of last week:
■ Ensor: Buy at 99p, target 125p ('Bid watch', 23 Nov 2015)
■ Marwyn Value Investors: Buy at 216p ('Cashing in on a top performer', 23 Nov 2015)
■ Trakm8: Run profits at 262p ('On track for record earnings', 24 Nov 2015)
■ Walker Crips Group: Buy at 49p, target 60p ('Profit from a profit surge', 24 Nov 2015)
■ Renew Holdings: Buy at 362p, new target range 390p to 400p; Cambria Automobiles: Buy at 73p, new target 90p; Tristel: Run profits at 142p; Pure Wafer: Sit tight at 165p and await details of capital distribution ('Running small cap winners', 25 November 2015)
■ Cohort: Run profits at 418p; Inland Homes: Run profits at 70p ('Riding momentum stocks', 26 November 2015)
■ Record: Hold at 28.75p ('Record awaits the Fed decision', 26 November 2015)
■ First Property: Run profits at 47.5p ('Investing for bumper gains', 30 November 2015)
■ Paragon: Run profits at 384p; Redde: Run profits at 174p; Fairpoint: Run profits at 175p ('Capitalising on investor overreactions', 1 December 2015)
■ LMS Capital: Tender your pro-rata allocation ('LMS tender on the money', 1 December 2015)
■ For a limited period and strictly subject to stock availability, Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com at a special promotional price of £11.99, plus £2.95 postage and packaging, or by telephoning YPDBooks on 01904 431 213 to place an order. It is being sold through no other source. Simon has published an article outlining the content: 'Secrets to successful stockpicking'
