I give you $0.36, you give me $0.44. Thats what Lion AsiaPac is....

First of all, before I start, I would like to say that I do not believe in giving exact numbers because I am not anal retentive. The numbers I get are from the latest quarterly financial statements and I like to round them off, so specifics are just not my cup of tea.

Okay, lets get back to this company. So what is the big deal about a company that has not done much over the past 3 years? It is exactly why I think there is something about it that is intriguing.

Lion Asiapac does not do much...basically they are engaged in the manufacturing of electronics and automotive components and limestone processing. Limestone is used as a catalyst in the process to extract iron from iron ore. Scrap metal processing is also a part of their business. Ha! That is a real mouthful! So it is really quite a bit...

I know...it confused me too. They are so diverse...Did I mention that they also held a 6% stake in a chinese automobile maker Anhui JiangHuai Automobile Ltd which is listed in Shanghai.

Now instead of talking about the business, lets talk about their investment. Currently, they are in the process of selling the stake and at current price this will net Lion Asiapac around Rmb 600 million. At current exchange rate it should net about S$129 million. The latest balance sheet shows the company holding S$69 million with S$20 million in liabilities. So netting off all the cash and liabilities, the company will hold S$178 million in cash.

Cash alone will account for $0.44 cents per share. That is value by my definition.

Oh yes, I need to talk about the risk in investing this company! The company is looking to buy Polaris Metals at an offer of A$0.70 per share, which will cost them S$115 million. This is a loss making company, however it is very important to note that mining companies are not profitable for years till they bring the mine online. Polaris is targeting 2011 to start producing iron ore.

This acquisition will be beneficial for LAP if they do not pay too much but it does look like this is unlikely because they seem to be pulled into the bidding war right now. If they should raise their bids to a level that is not realistic, jump ship!

But at this moment, acquisition or not acquisition, we should focus on the cash balance of the company. Remember, we have only valued the cash balance of the company, that means that we have not looked at the future possible earnings or the value of the rest of the company.

I know a good deal when I see one. I do not mind swapping $0.36 for $0.44.

Have a good week ahead!

Best,

SVI