Stamford Tyres (STC): Sumitomo Rubber Industries (SRI), Japan’s 2nd largest tyre manufacturer and maker of Falken brand of tyres that Stamford distributes, will be taking a 1.8% stake in STC, via a private placement. New shares will be issued at $0.35, marking a 22% premium to previous close of $0.285. Proceeds from share sale will be used to finance STC’s expansion in South Africa, where mgt targets to double or triple sales over the next 3 yrs…
SRI may consider owning a larger chunk of STC in future. News is positive and represents a vote of confidence in STC.
At $0.35, Stamford Tyre is valued at 8.4X PE. Interest may also spillover to peer YHI, which trades at 7.7x FY10E PE, and GMG, a rubber plantation and processor, which trades at 23.8x annualized 2Q10 PE.
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