BSPM - Looking at BSPM's interest rate
Seeking Alpha article on interest rates paid on company's cash balance sheet.
Before I begin I should note that some of these companies, perhaps BSPM, will have their money in Honk Kong. Interest rate are much lower there, however, the article doesn't state where the money is kept so I'll assume it's on the mainland.
BSPM's 2 year interest rate is low at 0.06%. In 2010 they have improved this and are getting 0.13% interest rate. The argument goes that if they had the money on instant access they should be getting 0.30%. Perhaps they should lock their money up for 3 months and get 1.71%?
If they aren't then they are either a fraud or incompetent money managers.
BSPM has been looking at acquisitions - and they are not brimful of cash so I don't see it's wise to tie up it's money, however, how much more interest income would the higher interest rates give you? 0.30% (instant access) and 1.71% (3 month access) would give you an extra 7.6K and 72K a year respectively.
This year they are aiming at 20M net income. So, we're talking about boosting earnings by 0.04% for 7.6K and 0.36% for 72K.
I agree they should be trying to get the 0.30% and depending on circumstances more, however, its only to respond to the bear's insinuations. Stating the obvious - I would prefer they improved operationally by 1% rather than getting a better interest income.
