It was that of Bollywood film producer Eros, which was set to transfer its listing from Aim to the main board of the New York Stock Exchange. However, American investors' love for Indian film profits will have to remain unfulfilled for now.
The listing had already hit a few snags even before it was put on hold last week, as the board of Eros decided to put back the float date so that it could include its full-year results for the 12 months to 31 March 2012 in the listing documents. Those figures will be released shortly to the London shareholder base - and I firmly expect them to be impressive enough with analyst Steve Liechti at Investec Securities forecasting a rise in normalised pre-tax profits from $55.8m to $73.7m. That would drive adjusted EPS over 20 per cent higher to 46.4 cents, equating to 30p a share.
In fact, it was the combination of a single digit earnings multiple and decent earnings growth that first attracted me to Eros 16 months ago when the shares were priced at 247p (Movie Time, 22 February 2011). And transferring its listing to the US main market, albeit delayed for now, still looks strategically a smart move because the shares continue to trade on a deep and unwarranted discount to peers listed on the US main market. Indeed, Eros is currently being valued on a miserly enterprise value to cash profit forward multiple of six times - less than half the rating enjoyed by Lionsgate.
But the glaring valuation discrepancy with US peers means very little for investors who bought Eros Aim-traded shares in the run up to the New York Stock Exchange listing with a view to enjoying a significantly higher rating in the US. In fact, when Eros announced the US listing had been put on hold on Friday 8 June, its shares plunged over 20 per cent to around 200p as the hot money headed for the door and, in the process, wiped out all our paper gains.
However, despite the setback, I believe this has opened up another medium-term buying opportunity with the shares trading on a miserly 6.6 times March 2012 earnings estimates, a rating normally given to a company that has gone ex-growth or one that has serious financial concerns. That is hardly the case with Eros as net borrowings of $114m at the end of September represented a little over 25 per cent of net assets of $430m (£278m). Moreover, earnings momentum is hardly going to go into reverse as this is a highly profitable and fast growing operation, with a geographic bias to emerging market growth on the Indian sub-continent, supported by an attractive content model and an enviable pipeline of films.
It also seems lost on investors who headed for the exit that Eros has some significant asset backing including a 78 per cent stake worth £144m alone in Bombay Stock Exchange listed subsidiary Eros International Media. So not only are Eros shares now being valued on an unwaranted 15 per cent discount to book value, but around 60 per cent of the current share price is backed by that holding in EIM. It’s worth pointing out, too, that the board has a significant vested interest in managing the business to maximise shareholders' returns and that includes transferring the listing to the US as soon as practically possible.
In my view, the low free float and reduced liquidity (the very issues that the US float would have addressed), led to the sharp drop in Eros shares, rather then huge selling volumes. In fact, only 93 trades went through the market on Friday 8 June, a combined transaction value of 0.5 per cent of Eros’s market value. That's completely out of synch with a 20 per cent share price drop. From my lens, this is a medium-term buying opportunity.
■ Ontario Teachers' Pension Plan must be having a very close look at the books of Goal Soccer Centres, as the Takeover Panel has extended its 'put up or shut up' deadline to 9 July at the request of the board of the compnay. This is hardly a surprise since the Canadian fund manager will have to stump up around £130m to take the business private so needs to do its due diligence properly. There is little reason to change my positive view on Goals shares and stand by my buy advice at 130p (Bid target worth punting on, 28 May 2012).
MEET SIMON AND OTHERS AT OUR INVESTOR SEMINAR
All this volatility is creating some pretty compelling investment opportunities - and to help readers capitalise on them Investors Chronicle is hosting an investors seminar in London on Monday 18 June. On the day there will be valuable presentations from our own Trader Dominic Picarda and I will be giving an investment Masterclass including some potentially very profitable share tips. There will also be informative seminars from Stanley Gibbons, the biggest name in stamps, and listed products provider Societe Generale. Tickets cost £25 each and can be reserved online at www.icroadshow.co.uk.
