Boustead: Announced it has entered into an agreement to purchase 50m new shares in OM Holdings, an ASX-listed Co. engaged in manganese mining operations in Aus, China and SG. Boustead aims to support OMH in the construction of its infrastructure needs (eg. energy intensive ferro alloy manufacturing facilities) as the latter expands its bases Asean.
OMH guided for lost in FY11 due to non-recurring items, although it would be profitable at the EBITDA level, due to various non-recurring items, deferred mining costs and stock value adjustments. Transaction would see Boustead paying for stake in OMH at only 0.56x book.
The purchase price of A$0.35 per share, an 8.8% discount to the 15-day and 5.2% discount to the 30-day weighted average price of OMH and Boustead would eventually end up with a 8.6% stake in OMH if the transaction goes through.
As at 1HFYMar12, Boustead was in a net cash position of $168.4m. Even after this investment, it would still have large amount of cash waiting to be deployed. Nevertheless, this is a positive first step in making more efficient use of its capital. Kim Eng maintains BUY recommendation and $1.32 TP.
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