Friday, December 2, 2016

"Something is brewing for this Company..."

There is something happening in this company.

The company is Chuan Hup Holding Ltd and the last post I have written about it was a long time ago.

Currently I am making paper losses currently.

The reason I continue to hold on to it is because:

The conservative management - The management has never tried to grow aggressively despite having so much cash, but they are also not worried to take action when required to do so. This is shown in their decision to invest in Australia, way before other companies that just started to make inroads into the country. Another action is the company's decision in rejecting Falcon Energy Group Ltd initial general offer for CH Offshore Ltd, which led to a higher offer from Falcon Energy Group Ltd.

No borrowings - After holding this company for some years, I realise it does not leverage up for growth. We know that eventually Fed will increase their interest rate. Thus, a company without borrowings seems to be on the "greener grass" as of now.

Dividend - The company has been paying dividend continuously since 2004 (except 2009).

Seems to have no restriction - The company's core activities is investment holding. It does not seems to have any restriction stopping them in entering another industry. I have said this before and I will say it again, I deem Chuan Hup Holdings Ltd as the "Berkshire Hathaway Inc" in Singapore.

Do note that the company did not pass the Enhanced Triple S Scorecard with Dividend Scorecard Portion.

So what is brewing?

There are 5 articles to read to fully understand the situation. I am assuming you will find it hard to understand. So I will summarize with the following;

On Chuan Hup Holdings Ltd (The full article is here):

On LH Group Ltd (The full 4 articles are here, here, here and here):


After looking at this 2 mind maps, the main jest of these articles is that eventually:

"Upon completion of the sale and transfer of PSDH’s shares in PSD to LH Group Limited. MSH shall procure PSDH to direct LH to allot and issue an aggregate of 59,151,600 ordinary shares in the capital of LH to CH Biovest Ltd."

These shares will be about 80 cents each (against an eventual net tangible asset of 0.86 cents of the FUTURE LH Group Ltd).

Chuan Hup Holding Ltd will eventually owns between 35% to 40% of the FUTURE LH Group Ltd.

So what to do now?

In short, being already vested in Chuan Hup Holdings Ltd, I will continue to stay vested and maybe buy more of Chuan Hup Holdings Ltd (limited cash). This is because if this deal pulls through, Chuan Hup Holdings Ltd will become super undervalued. Furthermore, they did not even do rights or borrow to complete this transaction.

Although there is still a 1% chance of the whole deal not getting through, but it is still safer to get more of Chuan Hup Holdings Ltd. Because they will still continue to get interest from their initial loan deal to Major Star Holdings Limited and PSD Holdings Pte Ltd. 

Another factor is that if this deal do not pull through, Chuan Hup Holdings Ltd may increase their dividend to support the share price. If they increase dividend to 2 cents, the dividend yield as of now will be 8.3%. Even if the increase is only up to 1.5 cents, the dividend yield will still be 6.25%. Nevertheless, even if the dividend did not increase (stay at 1 cents), the dividend yield will still be 4.16%.

Current Price: $0.235 as of 1 Dec 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at $0.290. 

For those who are interested in the Enhanced Triple S Scorecard, do not hesitate to contact me directly.

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4 comments:

  1. Replies
    1. Hi Anon,

      Yup. This should be a RTO and with the help from Chuan Hup.

      Regards,
      TUB

      Delete
  2. Replies
    1. As per investopedia, A reverse takeover (RTO) is a type of merger that private companies use become publicly traded without resorting to an initial public offering (IPO). Initially, the private company buys enough shares to control a publicly traded company. The private company's shareholder then uses its shares in the private company to exchange for shares in the public company. At this point, the private company has effectively become a publicly traded company. An RTO is also known as a reverse merger or a reverse IPO.

      For this case, LH Group Ltd buy up PSD Holdings Pte Ltd but in actual fact it is the other way.

      Delete