The atttactions of dual listing
For a company that can be expected to grow its earnings at a rate of better than 50 % annually during the next few years a p/e ratio of more than 20 would be fair in a normal environment. Actually it is assumed that a justifiable rating is the anticipated growth rate of earnings per share during the next few years. If we use this yardstick a pps of 30 dolllars might be justified this year since earnings per share have been projected to be 50 cents. The current situation is that the pps is less than 5 % of that number. A decisive factor in this connection is that Chinese microps have been under a cloud in the US for some time due to the fact that the numbers published by a number of these companies have proved not to be reliable. The Chinese who are eager to raise money in the US whether they need the money or not appear to be scotfree even if they are swindlers. This malaise has a very detrimental effect on the stock price of Chinese microcaps that are clean too since it seems impossible to identify these companies.
There are several arguments in favor of a dual listing in Stockholm. -for one thing, a large part of the float is owned by Europeans, especially Swedes. I am myself a European owning 110,000 shares in SIAF. I find it reasonable to expect that a listing in Stockholm would generate substantial publicity in the Swedish financial market since a high-growth Chinese microcap with excellent growth opportunities would seem very "sexy". The fact that there are few foreign companies listed would make it stand out.
It is my impression that the average p/e ratio in Stockholm is about 13. SIAF currently trades at a ludicrous prospective p/e ratio of 3. I take it for granted that this would seem very attractive to Swedish investors at large. It seems that there is a good chance that the pps could appreciate several hundred percent within a year after a listing in Stockholm.
I also suggest that the cash dividend is increased substantially, for instance to 15 percent of net profits. A significant cash dividend is a good indication that the profits are real. Paradoxically I think it is a good idea to raise the cash dividend significantly if SIAF needs a good deal of money for future expansion. How come? 15 % of net profits is marginal when it comes to how much it can advance future growth. If a significant cash dividend enhances credibility and thereby the stock price the beneficial result is that it will become possible to raise money by selling shares without undue dilution. This will presumably amount to much more money than the money spent by raising the cash dividend.
AI
