Q: would you buy the stock given the news of capital returned and 2 new stocks being issued?
5i Research Answer:
Splitting the company into two to separate the PNG business makes sense to us. The return of capital could be as much as 76c per share. This all sounds attractive...BUT....it is already a very small company. With less capital, and a split, shareholders will be left with two tiny market cap companies, and it is very possible that they will struggle to get investor attention. Valuations are cheap, but owning two sub ~$30M market cap companies may prove to be very frustrating, unless small caps stage a big rally. Adding in cyclical risks, and we think the 36% YTD gain already reflects some of the possible potential. Thus, we are less enthusiastic at this time on this split.