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ChipMOS TECHNOLOGIES (Bermuda) LTD. Message Board

  • boobermonkey boobermonkey Jan 20, 2012 1:34 PM Flag

    Enhancing shareholder value

    I've been a lurker on this forum for a long time and I have a significant portion of my investment in IMOS. There have been discussions on approaches to maximize shareholder value, some of which have come to light while some remain in motion.

    With the buyback going on, we've seen a tremendous increase in IMOS price (of course, the rise in the DOW/Nasdaq also helps). What I'm wondering is if the buyback is the way to go in the future, rather than starting a dividend or having dual listing, as suggested by some on this board. The dividend and dual listing may be irrelevant, much like the reverse split of last year. If the company pumps in $10 million / quarter to repurchase stock, I bet the price will go to $30-$40 by next year's end.

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    • The $0.15 per share cash needs to be paid to the IRS. In fact, if you do not pay IRS on time, the penalty is like 4% per year.

      As far as I am concerned, I always overpaid IRS tax each year, and I am 100% optimistic of my gains. I plan to sell some winners in 2012 to take advantage of the low 15% rate, before the tax goes up. I can sell and buy back to take the gains now.

      Thus I support a dividend, instead of waiting for the company to buy back shares at extremely slow pace.

      If the company can buy a large number of shares in a tender offer with some big shareholder participation, then I would like it too.

    • Buyback below fair value is better than div

      Question is what fair value is..

      I think 8 time eps adjusted for one time depre is good .. I get fair value $32

      So buy back below this price is better option as far as I concerned

    • There are experts in our world, though I am probably not one of them. The guy is right that if you sell your newly purchased shares (purchased with dividend) in less than a year, then the tax changes. Well, I suppose you can hold the small percentage of shares until a year later. Why sell so quickly if you believe in IMOS? I would not see this as a big deal. Besides, for IMOS to complete the stock purchase, you don't see the full benefit until years in the future (IMOS cannot purchase too many shares in a day). So either way, we have to be patient to see the benefit:))

      IMOS has about 30 million shares outstanding (plus or minus 5 million). For our arithmetics, let us assume 30 million sharp. Also assume that the price of IMOS is $10 before the dividend is paid (about $2 more than today). We have two options:

      Option A: Chipmos Bermuda issues $30 million dividend to shareholders, at $1 per share, and the price of IMOS drops from $10 to $9 on the day dividend is issued. Then shareholders use all the dividend to buy IMOS shares at $9 per share. If a hypotherical shareholder owns 300,000 Chipmos Bermuda prior to dividend, and got $300,000 dividend, at $1 per share. He (or she) can add 33.333 shares of IMOS at price of $9. Thus he will own 333,333 shares of IMOS after buying more shares using the dividend. IMOS still has 30 million shares outstanding. So the guy now owns 1.11111% of Chipmos Bermuda.

      Option B: Chipmos Bermuda uses $30 million to repurchase and cancel 3 million shares of IMOS at $10 per share. Then the shares outstanding of IMOS will be reduced to 27 million. So the shareholder with 300,000 shares will own 1.11111% of the "after 30 million" IMOS Bermuda.

      It should be clear arithmetically that, without tax consideration, the results in above two options will be the same.

      Now since there is tax, with option A, basically the shareholder has to come up with 15% more cash, or $0.15 per share, to buy the shares of IMOS. The 15% is used to cover tax on dividend, at $1 per share.

      When you sell your IMOS shares in 2013, such tax will be recovered, at 20%, the expected tax rate after 2012. So at time of sale, we pay less tax, at $0.20 per share.

      So we pay $0.15 additional cash now, and will receive $0.20 tax benefit later. Not a bad deal at all!

    • memory....i don't know that we ever had an expert on the long side......our experts are always the bashers who claim to be....

    • Boo- I appreciate the recent increase in price- but I would not classify it as 'tremendous', just way overdue. In addition to the buyback they will have dual listing [ probably by year end] and the company may also annouce a dividend. These are not mutually exclusive with the buyback. With current FCF an 8% dividend would only cost 24M,easily affordable. Personally, I would rather that they purchase all available shares under $12. In any case with real EPS this year of say, $2.50, this stock will start to get noticed and anyone in under $10 will be rewarded IMO.

      • 1 Reply to marnis123
      • Completely agree. They should buy as much stock as soon as possible. When they are sitting in cash in 2013, 2014, etc. let them do their dividend on fewer shares. If the stock moves dramatically higher, where a buyback is not accretive, then yes, issue a dividend at that point. Hopefully when they report Q4 - usually in march, they will announce how much has been repurchased to date, and increase the dividend by another $10 mil (even if a lot is still available) - at current prices, best possible use of cash.

 
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