The long waited formal annoucement by Armarda, 10th July 2007

Annoucement - Placement

After the nearly unexpected, illogical, unreasonably spectacular rise in share price from nearly 3 cents half a year ago to 33.5 cents today, Armarda finally released the long awaited announcement:

PROPOSED PLACEMENT OF 43,750,000 NEW ORDINARY SHARES OF HK$0.20 EACH IN THE CAPITAL OF ARMARDA GROUP LIMITED (THE "NEW SHARES"

Reason they gave
They explicitly mentioned that the proceeds will be used to :

finance strategic partnerships or alliances, acquisitions or joint ventures for expanding the range of services offered by the Group.

History

The last time they issue placements ( at a pathetic 5 cents when it had a NTA of nearly 10 cents) was to raised fund to finance a Joint Venture with FESCO group in PRC. Though it had cash then, it could not use them because most of the cash is either tied up as paid capital or generated in PRC. Armarda entered the JV with FESCO group as a "foreign" enitity, hence it could not use the fund generated in PRC and had to be injected from "abroad". Without sufficient cash abroad, it had no much choice but to raise cash via placements.

Reason I guessed (hopefully I'm right)

In the same light, I guess the management might be currently negotiating a Joint Venture of the same nature as FESCO group type, i.e. it had to "inject" cash from "abroad". If not, with its current cash hoard of 95M HKD, or appox 18M SGD (incl. 40M "untouchable" paid up capital), there is little reason why it need to issue shares to raise SGD 13M this time.

Reason I guessed (hopefully I'm wrong)

But there might be another reason, a little bizarre but not entirely impossible given under current market enthusiasm. Due to the current market exuberance, the management might be thinking that Armarda's shares (at 33.5 cents) are way overvalued. What other time than now to exploit the current situation and raise as much cash as possible?

Conclusion

Anyway, at a placement of 32 cents, current share price of Armarda will be well anchored, no matter how ridiculous it might be, given current fundamentals. Another excuse for me to hold on to my remaining shares of Armarda in my portfolio.