Friday, January 27, 2017

Exciting News Ahead For This Counter!

Happy Chinese New Year!

Hope everyone have a great year ahead! For many investors and traders, Chinese New Year came early asthe Singapore Stock Market is in a buoyant mood and a lot of people are making gains.

For me, I was lucky to get enough rights excess of the Sabana REIT to have an average price of $0.320. I have since sold all my Sabana REIT shares.

The other lucky shot I had was Singhaiyi Group Ltd. As I have written on 25 Jan 2017, I bought the shares at a low average price of $0.099.

A day after my article was posted, the company made the announcement that they have divested all their holdings in TripleOne Somerset for $100 Million. This is a gain in disposal of asset for at least $30 Million.
SGX Announcement
Another important fact on this transaction is that on the 2016 annual report, the company actually has $45.8 Million of junior bonds issued to the entity owning TripleOne Somerset. This junior bonds will be returned in full to Singhaiyi Group Ltd.
2016 Annual Report
Therefore, other than a gain in disposal of asset for at least $30 Million, the company will also have an increment of $45.8 Million of Cash. With so much cash, I believe the management will continue to pay down their debt or maybe issue a higher dividend.

Nevertheless, do note that these report are announced on Jan 2017, which will not be reflected in the upcoming 3rd quarter financials. It will only be reflected in the full year financials announced in May 2017.

In view of the above positive, we should also take note of the risks involved.

A major issue is the company's stake in OKH Global Ltd. When OKH Global was in trouble last year, the parent company of Singhaiyi Group (not Singhaiyi Group itself) was the white knight that came to its rescue. The CEO of Singhaiyi Group then became the Chairman of OKH Global.

The parent company has then grant Singhaiyi Group the first right of refusal to be transferred the former's stake in OKH Global to Singhaiyi Group at $0.10 per share. This will be a total sum of $50 Million.
First Right of Refusal Announcement
So what could happen?

1. The first right of refusal will end on 5 April 2017. The parent company owns over 50% of Singhaiyi Group Ltd. In the event, the parent company intend to transfer the stake to Singhaiyi Group, the minority group will have not much say in this.

2. OKH Global shares are currently less than $0.10 per share. In the event, Singhaiyi Group are transferred the shares from its parent company. It will be paying significant goodwill for the OKH Global Shares. The winning party will be the parent company. Singhaiyi Group will be at the losing end.

3. This is most probably happening regardless of what everyone else thinks.

But I am not very worried...

1. OKH Global is also in property development business and it is in the developing of logistic and industrial properties. This will create synergy with Singhaiyi Group's development business.

2. OKH Global is more involved in developing logistic and industrial properties, while Singhaiyi Group is much more involved in residential and commercial property development. Thus, there will be synergy but no competition among the 2 companies.

3. Base on OKH Global latest financials, the Net Asset Value is about $0.13 to $0.14 per share. That will be less than what Singhaiyi Group will pay for per share.

4. I believe the management will announced good results for OKH Global and share prices will increase prior to the transfer of the shares. 

In Short

Now I understand why there was a sharp increase in share price after 23 Jan 2017. It was most probably due to the sale of the TripleOne Somerset. 

Nevertheless, even with the possible negative impact of the transfer of OKH Global shares, I am still very positive on the prospects of Singhaiyi Group Ltd for the next 6 months. I will definitely stay vested for the time being unless better opportunities arises.

Current Price: $0.115 as of 25 Jan 2017.

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

Do note the author is vested in this counter/company. 

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

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