23 December 2011

MMODE (0059): Employee Share Option Scheme (“ESOS”) 2011

Here is some of my homework of MMODE (0059). It may consist of mistakes due to human errors. So, don't take it so serious and please let me know. Thanks

According to the MMODE annual report 2010, the ESOS of MMODE actually have been given out since 25 April 2005

"Proposed employee share option scheme of up to ten percent (10%) of the issued and paid-up share capital of M-Mode ("Proposed ESOS")" which is around 96,267,000 x 0.1 = 9,600,000 shares

After given a bonus 1:2, total issued shares became 144,400,500 (2006) compared to 96,267,000 (2005).

Then, at 2010, total shares is 158,840,500 (2010) = 144,400,500 (2006) + 14,440,000 (2007~2009) ( Private shares + ESOS + others)

From Annual Report MMODE 2010
------ Number of options over ordinary shares of RM0.10 each ------
Date of offer Option price 01.01.2010 Granted Exercised Forfeited 31.12.2010
21.09.2005 RM0.10 3,816,000 - - - 3,816,00024.01.2006 RM0.26 45,000 - - - 45,000
21.08.2006 RM0.13 8,000 - - - 8,000
TOTAL : 3,869,000 shares

For Directors (>1,000,000 shares in ESOS):
Total: 1,225,500 + 1,225,500 + 1,365,000 = 3,816,000

Since the business of MMODE grow significantly recently, it is apparently a good time to exercise all ESOS to enjoy the benefits from the company (e.g. dividend and capital gain). So, after all ESOS is exercised, then the total shares will be 3,869,000 shares + 158,840,500 (2010) = 162,709,500 (estimated at the end of 2011)

Since in the last nine months, the total net profit of MMODE is:
Q3: RM3,913,000 or accumulated three quarters of RM10,768,000

Then if the Q4 MMODE manages to achieve the same net profit as it did in Q3, total estimated net profit will be around RM14,600,000.

So, our estimated EPS will be RM14,600,000/ 162,709,500 = 8.9sen.

Then, we can tabulate PE VS market price to assess the "value" of MMODE.
PE = 4, Market Price = 4*0.089 = RM0.356
PE = 5, Market Price = 5*0.089 = RM0.445
PE = 6, Market Price = 6*0.089 = RM0.534
PE = 7, Market Price = 7*0.089 = RM0.623
PE = 8, Market Price = 8*0.089 = RM0.712
and so on.

So, from the estimated EPS, and based on the relationship of PE and EPS, we can have a better picture to determine where is a better buying point or selling point, if and only if, the assumptions matches in the future.

In other words, in future, if the EPS of MMODE is better than expected, then our target price should be higher and vice versa. PE ratio is just one of the tools help us to determine whether paticular investment is s considerable or not. And PE also affected by the future earning, which is unpredictable and it is the reason why all investments have their risks.

Rome was not built in one day. KLSE did not soar to 1590 points in one day too from 888points. Patience in the right place receives reward; But Patience in the wrong place receives 'bird poo'. Is MMODE is the right place to put our money in next few years? Let me do a record first and see how in the end of 2012.

That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage.

Written by: Xaivier Chia
(Note: My portfolio consists of MMODE shares. The content may have conflict of interests. Please do homework before making any investment decision.)

ESOS in last few years:
"Kindly be advised that the abovementioned Company’s additional 3,869,000 new ordinary shares of RM0.10 each issued pursuant to the aforesaid Scheme will be granted listing and quotation with effect from 9.00 a.m., Tuesday, 27 December 2011."
"Kindly be advised that the abovementioned Company’s additional 2,275,000 new ordinary shares of RM0.10 each issued pursuant to the aforesaid Scheme will be granted listing and quotation with effect from 9.00 a.m., Friday, 24 February 2006."

"Employee Share Option Scheme (“ESOS”)The Company’s Employee Share Option Scheme is governed by the by -laws approved by the shareholders at an Extraordinary General Meeting held on 25 April 2005 and vested upon being granted. The ESOS is to be in force for a period of 10 years from the date of implementation.
The salient features of the ESOS are as follows:
i) The Option Committee appointed by the Board of Directors to administer the ESOS, may from time to time grant options to eligible employees of the Group to subscribe for new ordinary shares of RM0.10 each in the Company.
ii) Subject to the discretion of the Option Committee, any employee whose employment has been confirmed and any executive directors holding office in a full time executive capacity of the Group, shall be eligible to participate in the ESOS.
iii) The total number of shares to be issued under the ESOS shall not exceed in aggregate 10% of the issued share capital of the Company at any point of time during the tenure of the ESOS and out of which not more than 50% of the shares shall be allocated, in aggregate, to directors and senior management. In addition, not more than 10% of the shares available under the ESOS shall be allocated to any individual director or employee who, either singly or collectively through his/her associates, hold 20% or more in the issued and paid -up capital of the Company.
iv) The options price for each share shall be the price at which the Grantee is entitled to subscribe for an Option which shall be the higher of the par value of the Company Shares and a price set at the five (5) days weighted average market price of the Company Sh ares prior to the date of the Offer.v) All new ordinary shares issued upon exercise of the options granted under the ESOS will rank pari passu in all respects with the existing ordinary shares of the Company other than as may be specified in a resolution app roving the distribution of dividends prior to their exercise dates.


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