Hovid Bhd: Potential coattail gains? (2)

Hovid Bhd major shareholders, holding close to 80% of stake in Hovid Bhd, had launched a corporate action seeking to delist Hovid Bhd with a similar exit offer of RM0.38 per share compared to its 1^st attempt at taking the company private.

EGM vote outcome due back in 15 November 2018 shows the final verdict being Hovid taken private, thus closing the potential coattail gains deal as highlight by yours truly back in June 2018.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Pimpinan Ehsan – Cash arbitrage gains on the cards?

Pimpinan Ehsan Bhd (PEB) (Bursa Stock code: 5622)(formerly known as TriPLC Bhd) was in the news for its corporate deal involving the following in sequence:

(i)                  Transfer of TriPLC under Pimpinan Ehsan Bhd - Completed

(ii)                Sale of 100% stake in TriPLC construction business unit to Puncak Niaga - Completed

(iii)               Declaration of special dividend of RM1.95 per share from sale proceeds of TriPLC - Completed

The stock recently went ex-special dividend on 14 June 2018, and currently trading at ex-dividend price of RM0.64 per share. It is currently trading at a whopping 45% discount to net cash per share of RM0.93 per share, which may potentially be distributed back to shareholders should a core business is not found by PEB within a year.

Final thoughts:

Pros: Potential unlocking of share value via dividend distribution catalyst, acquisition of earning accretive business

Cons: Extension of timeline for new acquisition of business thus delay in full realization of share value/narrowing of discount to NTA/net cash per share, Management hoarding cash (low probability), acquisition of value destroying business.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Kretam Holdings Bhd: Potential MGO arbitrage gains? (2)

Yours truly had previously profiled Kretam Holdings Bhd which may be an attractive MGO arbitrage gains play.

The worst possible outcome has occurred for risk arbitrageurs in Kretam Holdings Bhd where due diligence results were not acceptable to the buying party, Hap Seng Plantations and share sale agreement was terminated with immediate effect.

Prices of Kretam Holdings may fall back to pre-share sale agreement levels or even lower due to perceived weakness from adverse due diligence results. This ends any remaining chance of potential risk arbitrage gains.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Kretam Holdings Bhd: Potential MGO arbitrage gains?

On 21 February 2018, Hap Seng Plantations (HSP), a bursa listed plantation company announced that a share sale agreement was entered between the major shareholder of Kretam Holdings Bhd and the company to purchase a combined stake of 55% share in Kretam Holdings Bhd. Completion of the share deal would see Hap Seng Plantations extending a mandatory general offer for all remaining 45% share stake in Kretam Holdings Bhd, where investors are able to sell their shares at the offer price of 92 sen per share without restriction to HSP.

Several conditions are required to be fulfilled, namely Hap Seng Plantations shareholder approval for the share purchase.

Currently the company is undertaking due diligence exercise on Kretam Holdings, and extension has been sought for finalization of due diligence.

The delay in completion of due diligence has made investors jittery, fearing that a deal could not be reached and slashing any hopes for an MGO to buyout all other shareholders at 92 sen offer price. Sharp selldown was seen on 4 June 2018, where prices plunged 20% to close at 62 sen per share, a huge 48% discount from the offer price. Prices rebounded slightly to close at 66.5 sen per share the next trading day on 5 June 2018 after clarification was made to the media that due diligence exercise is still ongoing.

Should the deal is officially cancelled, prices could plunge further to its 52 week low of 52 sen per share a strong support where its price has been hovering above these levels for whole of 2016 and 2017, a 23% loss from current share price. Investors could potentially benefit on the upside of ~40% as any deal is very much alive currently.

Final thoughts:

Pros: Reward to risk ratio of ~2:1, large upside gains of ~40% for a deal that could work out in 6 – 12 months.

Cons: Extension of timeline for deal completion, adverse findings in due diligence results resulting in lower offer price or total cancellation of share sale agreement.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Red Sena : Safe Haven in times of turmoil?

Red Sena, an F&B SPAC listed on Bursa Malaysia (Stock Code: 5270) is currently sitting on 371m cash trust proceeds. Similar to the Reach Energy, shareholders who vote against the acquisition of a business concern identified by management are entitled to their share of cash trust proceeds.

Cash trust currently owing to public shareholders amounts to RM0.464 per share, a tiny 2% discount against the current ask price of RM0.455.

Shareholders can only expect FD like returns ranging from 3-4% per annum net that comes with potential for solid acquisition targets. Downside for shareholders is protected with the right to reject any deal that is deemed expensive or businesses that has murky future outlook.

Investors may diversify into this unique situation-based stock. With stocks riding high every day and solid undervalued gems ever harder to be found, investors may park their cash in this stock in the event of a widening discount against cash trust per share.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Reach Energy: Potential Risk Arbitrage? (2)

Recall in an earlier posting that highlighted the risk arbitrage deal offered by Reach Energy listed company shares. Fast forward to 15 November 2016, it had successfully obtained sufficient shareholder approvals to acquire an oil and gas outfit.

The option to vote officially expires on 28^th October 2016 where if you are a shareholder up till the end of business day, you have the right to attend the EGM and cast your vote on the acquisition. Shareholders who voted against the acquisition would have gotten back approximately RM0.76 per share as per the following Bursa stock exchange announcement made by the company via a share purchase mechanism:

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5271517

Shareholders focusing solely on extracting the risk arbitrage spread offered by Reach would have earned a decent premium. However, the share repurchase price paid by the company is subject to the qualifying acquisition going through. Christmas indeed came early should you have bought into Reach below RM0.70 per share price levels.

This post will end the story for Reach risk arbitrage chapter.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Hwang Capital: Potential bumper dividend round 2? (3)

Recall in an earlier posting that highlighted the takeover offer by Hwang major shareholders. It was speculated that another major stakeholder DBS would accept the offer but the parties agreed for acceptance did not work out as expected as per news article summarized below:

http://www.thestar.com.my/business/business-news/2016/07/02/takeover-offer-for-hwang-capital-turns-unconditional-and-acceptances-period-extended/

http://www.thestar.com.my/business/business-news/2016/10/10/hwang-capitals-conundrum/

Since the company’s share has been suspended there will be no room for entry or further opportunities and this post caps off the Hwang privatization journey.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Golden Land Bhd: Special dividend and capital repayment as catalyst for share price uptrend movement? (2)

Recall in an earlier blog posting that yours truly had speculated on the potential share price uptrend movement due to 2 separate cash distribution and the perceived margin of safety for the intrinsic cash value post distribution.

The trade did not work out as expected as share price took a dive following the special dividend ex-date on 28 March 2016. Announcement of capital repayment did not have the desired effect as well.

Reasons that could explain the downtrend may be expected heavy capital outlay for investment in plantation land that could lock up cash reserves. Other than that it was a value trap so far that trapped my investment funds which did not see any growth for more than 6 months.

This will be the last of Golden Land posting until there are any new corporate developments.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 


Disclosure as at time of publication: Long Golden Land Berhad.

Hwang Capital: Potential bumper dividend round 2? (2)

Recall in an earlier posting that yours truly has speculated on the possible bumper dividends for the 2^nd time coming from Hwang.

In a surprise turn of events, Hwang had announced on Bursa Malaysia that its major shareholders, holding about 30% of total shares outstanding in Hwang Capital intend to launch a conditional takeover offer for the remaining 70% shares outstanding for Hwang Capital at RM2.65 per share, a decent premium of about 16% from current share price of RM2.21.

The share price had a brief run up in late March, almost breaching the RM2.65 levels before share price took a dive following an announcement that it will be extending timeframe for acquisition of new business for another year to April 2017.

Shareholder wishing to sell back their shares to Hwang at RM2.65 can do so should Hwang able to control more than 50% of voting shares after tabulating all valid acceptances to the offer.

A quick check on the shareholder register showed another substantial shareholder, DBS bank, which is in turn controlled by Temasek, Singapore’s sovereign wealth fund, with the potential in becoming the kingmaker in this deal. Its stake at a price of RM2.65 is valued at approximately SGD61 million, chump change compared to its huge asset base. The author is of the view that likelihood of DBS selling away the stake is high, thus paving way for an eventual delisting, which is incidentally the major shareholder’s desired intention.

Minority resistance may surface due its substantial discount of 21% compared to its NTA of RM3.22 per share. However, low interest rate environment and a continued delay may force shareholders to sell in view of the dimming prospects for its only core moneylending business.

Ultra patient shareholders may finally see light at the end of tunnel after holding on to Hwang shares. Since the bumper dividend on April 2014, share price has been on a steady uptrend from a low of RM1.80, and shareholders may have the chance to dispose its shares for a total of 47% capital gains after 2 and a half years.

Share price movement post announcement of the deal when the stock begins trading may present further opportunities for risk arbitrage.

Final thoughts:

Pros: Opportunity for unlocking share value for shareholders, higher offer price

Cons: Failure to obtain requisite valid acceptances pass conditions precedent.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.