Baker Tech

Baker Tech: lifted halt this morning. Recall yday (at 2.47pm), we mentioned that the High Court has dismissed SMM’s claims (in effect to invalidate Baker Tech's sale of its 15% stake in PPLH to QD Asia Pacific) in their entirety. The news is neutral for SMM, since the Street has not factored in the scenario of a positive settlement in SMM’s favor. Nevertheless, the court decision is good news for Baker Tech, which had deferred the gain on disposal of PPLH of $58.2m (equivalent to 8.3cts/sh based on the current 700m shares out). This development should also reduce the overhang on Baker Tech shares, given investor worries about a claw back on the US$116.25 ($150.5m) cash from sale of PPLH. Baker Tech says if the Court’s ruling is not appealed against or is upheld on appeal, the Co will then recognize the gain on the disposal. Baker Tech recently completed a 2-for-5 rights cum warrants issue. The expected date of issuance of the warrants is 6 Jun. Assuming the warrant entitlements are fully taken up, we estimate Baker Tech to have $194.3m net cash (based on Mar ’12 results), which translates to $0.278/sh. This compares with the counter’s last close at $0.275. The stock trades at 9.7x P/E. The counter remains halted until further notice. Details of outstanding warrants: i) Baker Tech W20121116, 282.6m units out, $0.32 exercise price ii) Recent 2-for-5 warrants, 280m units out, $0.27 exercise price