Sale of United Envirotech Limited shares. Viking Offshore & Marine (VOM) announced the disposal of 32m shares in United Envirotech Limited (UEL), through a series of married deals and also on the SGX open market, reducing its stake to 4.48% from 11.19% previously. This move is not surprising as the management has always reiterated its intention to dispose of its non-core assets.
Estimate Realized Gain of $5.8m. The UEL shares, which were booked as available-for-sale assets, were purchased in June 2008, at an average price of $0.21 per share. The investment was impaired when the market price of the shares fell to $0.12 per share as at 31 Dec 2008. Subsequent appreciation in the market prices of UEL shares were credited to a revaluation reserve in the balance sheet. With average selling prices for the married deals and open market trades at $0.30 and $0.33 respectively, disposal of UEL shares would realize gains of about $0.18 per share. This translates to approximately $5.8m of realized gains. Sales proceeds totaled about $9.66m in cash, and will be utilized towards the repayment of loans and payables. We believe this would improve VOM's cash flows in the near term.
Restructuring process underway. Since its purchase of Viking Airtech Pte Ltd in late 2009, VOM has sought to transform itself from a consumer products company into an O&M player. To date, the company has disposed off a number of non-core investments such Tung Lok Restaurants Limited and UEL shares. VOM has also made several acquisitions of companies in the O&M space as it seeks to become an integrated solutions provider to shipyards and vessel operators. Recall that the VOM's strategy comprises of three key stages: (1) invest in complementary businesses, (2) integrate the different businesses to extract add-on values, and (3) internationalize its operations. We believe the company is currently executing second stage of its strategy.
Experienced management. In our view, execution of the company's strategy is aided by the fact that it is helmed by a very experienced management team. VOM Chairman Mr Andy Lim is a seasoned dealmaker, and is also the founder and Chairman of private equity firm, Tembusu Partners. CEO Mr Ong Choo Guan has over 30 years of management experience in the O&M industry.
Rating under Review. However, due to a change in analyst coverage, we are still in the process of revising our estimates; hence, we are putting our Buy rating and S$0.31 fair value estimate under review. (Chia Jiunyang)
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