Replies to post #51 on China Ceramics Co. Ltd. (CCLTF)

[viking86]

Thanks for clarifying the cashless option. It would be great for warrant holders to convert w/o paying anything extra at a cost basis of max 3.92! In this case, the "half" diluted O/S will be approx.:

12.5M + (14.6M/2) = 19.8 M shares (instead of fully diluted= 27.1M shares)

and the 2010 eps at earnout will be:

36.8 / 19.8 = $1.86 (instead of $1.36)

Assuming a share price of $15, the adj. PE will be:

15/1.86= 8 (cashless option)

For comparison, a PE of 8 in the fully diluted case (warrants redeemed for $5/sh) would yield a share price of only $13.6. Thus cashless means faster price appreciation since the diluted eps will be comparatively greater. Now I see why you said Mgmt may prefer the cashless option since they dont really need the extra cash.

[redman_2014]

I wasn't considering the cashless redemption when determining the breakeven point. Using that redemption method I do see how it's possible to get a cost basis below $4.

So then the decision is whether you believe they will use a cashless redemption or a $5 redemption when they make the warrants effective.

I personally will still stay on the sidelines because of my initial reasons of not liking the business model and also the inherent risk of being at the whim of casino management. My major concern is that AERCF will start to do well and the casinos take notice and either ask for a larger cut, or create their own departments and stop outsourcing to AERCF. Gamblers can be greedy and I just can't put it past them that some of the casinos won't attempt an oust in the foreseeable future. They may not, but I'm not about to risk my hard-earned money fighting the nature of the beast and since I consider this a possibility it's impossible for me to discern the future cash flow potential of AERCF.


I'm sure you will do well with this investment, it's just not for me.


-Adam