Yorkey Optical International (Cayman) Ltd (Yorkey, 2788) is a company suffering from corporate obesity - it is stuffed with cash, and has been since it listed in 2006, having consistently failed to execute its IPO investment plan or otherwise deploy the capital into its business.
At 31-Dec-2012, Yorkey had cash of US$113m (HK$878m) and no borrowings. The cash is worth HK$1.06 per share. Yesterday the shares closed at $0.65, a 39% discount to the cash. The market capitalisation is HK$538m (US$69.3m). The stock is also at a 55% discount to net asset value of $1.43 per share. 74% of the net assets are cash.
Now, after a change of control and the exit of a co-founder, Yorkey is seeking independent shareholders' approval to carry on dealing with its new 27.4% shareholder and using the cash to extend generous credit, putting the money at risk. With your help, we now aim to resolve this problem in the interests of all shareholders. Vote against the connected transactions, and demand a distribution of the surplus cash. We reckon they can pay out $0.81 per share and still have a comfortable contingency fund.
The dividend would benefit all shareholders, including the controllers. It would slim down Yorkey, deter its customers eyeing the cash pile and demanding more credit, and would dramatically boost the rate of return on equity.
Webb-site founder David Webb holds over 4% of Yorkey, below the 5% disclosure threshold. Templeton Asset Management Ltd holds 6.99% at the last disclosure on 20-Feb-2013. With SEHK allowing Ability Enterprise and Fortune Lands to vote, we have an uphill struggle to muster the remaining public vote. If you buy the shares, then make sure you vote them - we don't want people just buying for the discount and then sitting on the sidelines hoping that someone else will do the work.
The CFO told the meeting that all of the shares in the Employees Trust had by now been fully vested in 200 employees, but after 7 years, not one of them has left the company or withdrawn their shares from the trust and sold them. Incredible. Do the employees even know that they have these rights, or is this just a back-door way to cement a sub-controlling shareholding with extra votes? (7-Jun-2013)