I WOULD NOT. WHY?
Anonymous

I was excited and I even advised my friend to plan to purchase shares. I suggested that it was a good opportunity to diversify ones investments as they are quite limited opportunities in Grenada to do so.

After all, Cable & Wireless has  been a company making a profit in a dynamic industry. Never mind their strategic flip flop over the last five years when they seemed to have lost momentum and direction. Never mind the decline in customer service and the bunch of inexperienced people that the present management seem to desire. The previous sale of shares in GRENLEC, RBTT and REPUBLIC  HAVE SO FAR BEEN REWARDING for investors. So this is an opportunity for all Grenadians.

But how foolish I have been, now that I am better informed about the current price the shares will be sold at. What on earth is happening here? Why is the government so intent on ripping off the Grenadian people. Is it because that they badly need money to finance the election campaign? If so, why attempt to rip us off.  

My research has revealed, that in St Kitts, the shares in C&W was sold to the public for $5.00. St Kitts is not that much smaller than Grenada, and the company is equally profitable. Further research indicates that C&W Grenada is not four times larger that St Kitts or four times more profitable. So how come their shares are worth four times as much?  Mr. Blanchard please tell the Grenadian people why?

How are shares really valued in business? There are a few methods used. Based on common practice, the most appropriate method is deriving a multiple of its profit after tax. Essentially, the determination surrounds whether the current profit levels can be maintained and even extended in the future. In doing so, historical, current and a projected performance of the company is examined. Issues such as the competitive environment, the potential for growth in the economy, dividend policy, the strength of the assets backing the company, prospects for capital gains and the quality of management are all looked at.

Further, a good underlying basis for share valuation is known as an asset based valuation. Latest data accessed indicate that in the year 2007, the net  assets of C&W was EC$ 69 million with issued shares of 40,000,000. When the assets are divided by the issued shares, the current value of the shares is EC$ 1.72. Just look at this. EC$ 1.72.  Further given the year’s performance, dividends proposed is EC $0.33. on a total net  profit of EC$ 13million. A reasonable return on assets for the year. But what are the prospects for the future.

Certainly the telecommunications industry is a hot one and indications are that the sector will continue to grow. But the big question is how much for C&W. Given the continued liberalization and the advent of further competition in areas such as internet , broadband and fixed lines, it is difficult to see how C&W will  continue to record increasing profits. Assuming that a premium is added to the underlying value of the shares, how come that in this case and using this approach that it is about EC$ 18.00 per share?

Back to the multiple approach. When the current profit after tax is multiplied by a calculated P/E earnings ratio I am getting around $6.00 per share. Further, I spent some more time doing a discount cash flow analysis over a ten year period. With assumptions such as an annual revenue growth rate of 5%, a 30% TAX RATE, various discount rates ranging from 9- 17%, and an annual inflation rate of 4% etc. the findings were instructive.

None of the scenarios indicated a share price in excess of EC$ 4.00. So the BIG QUESTION IS HOW ON EARTH a price of EC$ 20.00 was arrived at.  Not even six, seven eight , nine or ten .THIS IS INDEED SCANDALOUS AND MERITS AN IMMEDIATE INVESTIGATION BY INDEPENDENT ACCOUNTANTS.

All professionals need to immediately do an examination and to make the findings public. Maybe I am a dummy. SOME ONE HAS DONE A VOODOO FINANCIAL ANALYSIS and maybe have been eating mountain chicken IS THIS . ANOTHER NNP SCAM?. I AM NOT BUYING AT THAT PRICE. WHAT ABOUT YOU!!!!!!

EDITOR'S NOTE: The share price has since been dropped to EC$125 as announced at the official launch of the sale of shares at a media conference on Tuesday, March 25, 2008.