Thursday, November 14, 2013

Butter & Baccarat

As the mining boom recedes it is increased interest in agribusiness and tourism that appear set to drive the next consumer phase of Sinophilia. This is reflected in takeover activity on the ASX this week with the action in butter and baccarat.

The bidding war for Warrnambool Cheese & Butter Factory (WCB) continues to escalate much to the delight of grateful shareholders. Reef Casino (RCT) holders have also now backed a winner. These are 3 year charts for both RCT and WCB.

It would seem less likely that a bidding war will ensue for RCT however with Echo and Packer engaged in battle elsewhere while Packer courts Sri Lanka as the Macau of India. WCB has at times traded above its most recent offer in anticipation of a higher bid. RCT continues to trade comfortably below the bid from Aquis.
RCT is not very liquid and thinly traded with 70% of the stock tied up by the operators Accor and Casinos Austria, so doesn't attract much interest from bigger investors or institutions. It traded around $4 yesterday, still well below the offer price of $4.354, and slipped back throughout today to close at $3.86.
Presumably the discount reflects a risk perception that the offer may not proceed successfully to conclusion? It may make sense for some to sell all or part of a holding to lock in gains now rather than risk the downside if the offer falls through. I suspect there would be many FNQ locals with small holdings in RCT who can pocket a nice Christmas bonus.
Update: RCT continues to trade well below the offer price on Friday with the price down again on typically smallish volumes. Someone definitely decided they wanted their Christmas bonus early with a few small transactions totalling a few thousand at the start of trade below $3.60! The odds at that price may be better than inside the Casino? Note: This post is general commentary and nothing posted here is intended as advice of any kind.

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