Netlink has play out mostly as the board wanted. Dividends increase, growth in profits, etc. However, the growth is too slow to offset the 45 mio in loans that are used in distributions.
The board would be more hopeful had the growth be more impressive. Going forward, Capex will.most likely increase and if the rate of growth is to continue, netlink could, at best, offset the 45 mio in distribution but they could hardly increase dividends anymore without either CONTINUING WITH THE LOANS DISBURSEMENT OR INCREASE LOANS TO DISBURSE as dividends.
APPT is a good lesson and reference. While the 2 companies are different with different growth sectors and Netlink seem more likely and also competent to capture the growth, it is never a great idea to use loans for distributions.
What happen if Netlink do not use loans anymore? The fall in shares price could be drastic. But Netlink won't do it, they are not stupid. They have enough debt room and cash flow to be on morphim for a long time and hope for growth to come to the rescue.
However, enjoying a 6 pecent yield while facing with such risk seem illogicial. Silly inc had APPT for 11percent yield and manage to offload it for capital gains yeARS ago. The riSK reward profile do not seem attractive.
With the increase in cash, there are several potential companies that silly inc would like to accumulate at the right price.
The company bought Capitaland not based on ratios but the fact that many did not realise the Capitaland will be a very different animal after the merger.
First, there will be a significant ARA type of fund management business. There are many ways to cash in the cow. Put all the reits under one managemENT and IPO it.
Offload different assets to different reits to recyle capital.
Last but not least, it will be able to truly build a whole township without the need to subcontract. Vietnam is industrial towns hot bed, capitaland can build hotels, malls, factories and homes, and also manage it, and sell it for any governmemt overseas.
Capitaland is not a value or turnaround play, but is a good concept play, and the possibities to cash in after the merger is quite aplenty, and those coporate actions make good story headlines.