Rationale behind delisting. TWI's decision to delist was driven by the stock's low trading liquidity, compliance costs of maintaining its listed status, and low valuations in management's view. We are not surprised by the company's decision to delist, given that the stock turned in an average daily volume of just 38,254 shares over the past year, and exchanged hands on only 25 days in the past 12 months. The low liquidity was in part due to its small free float of just 24.1%. Given its extremely low liquidity, the costs of maintaining its status as a listed company outweighs the benefits. A delisting could allow the group greater flexibility in its restructuring and expansion plans while allowing it to save on listing-related expenses.
No near term price drivers; accept the offer. TWI's earnings have been lacklustre. 1Q09 earnings fell by 49.4% YoY to HK$4.4m while FY08 earnings plunged 43.5% to HK$20.0m. Earnings have been volatile with poor visibility owing to wild swings in profits and losses incurred from the group's coffee hedging derivative instruments. The group's weak earnings have impaired its dividend payout, which was cut from 11 HK cents in FY07 to just 6 HK cents in FY08. Going forward, there are no near term price drivers or earnings catalysts. TWI's delisting offers shareholders an opportunity to exit at relatively reasonable valuations, in our view. As such, we are inclined to accept the offer.
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