(Nov 6): Shares in egg producer Chew’s Group have taken a tumble since the Oct 25 announcement that negotiations with external parties about a possible offer have been terminated. The counter, which closed at 59 cents on Oct 25 before the announcement, opened eight cents lower at 51 cents on Oct 26. The stock has since rallied slightly to end at 52.5 cents on Oct 27.
At that level, Chew’s trades at 1.6 times its earnings for FY2016 ended Sept 30. However, the company’s FY2016 earnings include a oneoff income from the disposal of land use rights and a substantial part of its property, plant and equipment in May 2016. Excluding this disposal gain, Chew’s is trading at 22.2 times its historical earnings.
We have decided to take profit on our investment in Chew’s. We purchased our stake of 30,300 shares on Jan 10 at 32.5 cents a share. A sale at 52.5 cents a share gives us a profit of $6,060. We had also collected dividends of $148.47. Our total return therefore comes to 63%.