Sino Grandness Rights Issue

Sunday, 8 January 2017 12:03

Posted by owq 0 comments

I sold my Sino Grandness shares at 0.37 when they first announced a rights issue. I was planning to hold the cash to buy some shares back after the rights issue but my hands got itchy after waiting for so long without any news, I decided to buy some at 0.33. A week after they announced the amendment of the rights issue with some ridiculous terms and the price dropped all the way to 0.21 which is the new rights issue offer price.

I am still holding. This is a stock which I have been buying since I started investing and I've seen it go from 0.50 to 0.23, and to 0.79. I've always maintained a core position because I believe it was undervalued. Well, there are a lot of red flags but I feel that it's worth the risk. At least I'm not gambling with more than 10% of my money.

Now, the first time they announced the rights issue it was underwritten by UOB at a commission of around 6%. Huang also undertook to subscribe for his whole allotment. This time there's NO underwritting, and Huang will subscribe for a variable amount of shares subject to the amount of uptake. I'm not an expert, but this is really disgusting. What are they thinking? If they really need the money, how will these terms ensure they get what they need? There seems to be some cashflow problems at the company. I am getting mixed feelings about this counter.

ARA Asset Management takeover by Scheme of Arrangement

Sunday, 1 January 2017 11:52

Posted by owq 0 comments

And yet another stock is being taken over by private equity. I have only invested for 2 years and a lot of my stocks are being delisted. First, Saizen, then China Merchants Pacific, and Select Group.

I'm not selling ARA yet and I will definitely vote no. This is because the offer is by scheme of arrangement, where number of investor count also plays a part. So there's a good fighting chance for the minority investors. I would probably have sold if it was a general offer. Anyway the price is around 1.70 right now. It is about a 4.7% at the takeover price, which is worth the wait anyway even if the deal passes. It is likely that the deal will pass by at least June 2017. So close to 9.4% p.a. return.

Furthermore, the company has good prospects and I'm unwilling to sell it cheap. Especially after they announced such a good set of results and increased their AUM by so much. The PE right now is at least less than 20x. And in 2007, they IPOed at 43.6x. Granted PE might not be the best way but if we look at the AUM I definitely feel that the company is worth more.

There is no other comparable company on SGX that has a business model like ARA. So if ARA really gets delisted it'll be hard to find a replacement. For now I bought Frasers Centrepoint (FCL) as a pseudo replacement in case ARA is sold. I like the recurring cashflows of FCL even though it is not as asset-light as ARA.