RH Energy

RH Energy: update on RTO by Chiwayland previously announced 25 Jan 2013. RH Energy will acquire Chiwayland for $399m, or 55% of the realizable NAV of Chiwayland as at 31 Jan 2013 as determined by an independent mkt valuer, whichever is lower. The purchase consideration takes into account, - Chiwayland’s net profit of Rmb 105.7m, Rmb 97.3m and Rmb 126m for FY10-12. - NAV of Chiwayland of Rmb 202.4m - Indicative RNAV of Chiwayland of approx Rmb 3.5b, based on a 29 Feb 2012 independent valuer’s rpt The purchase will be satisfied by a cash payment of $20m and issue of 549.3m new RH Energy consolidated shares at $0.69 a piece (co has proposed a 3-into-1 share consolidation). Grandale Enterprise, the arranger, shall be issued 16.5m consolidated shares. The long stop date is currently set at 12mths from date of the sale and purchase agreement. Immediately after the proposed transactions, the vendor will own approx 81.1% of the enlarged share base. The co proposes to carry out a compliance placement through the placement of new consolidated shares of up to an aggregate value of $11m. In conjunction, RH Energy will dispose of its existing oil & gas services businesses for $36m. This compares with the NTA of the sale assets at US$32.8m. The est loss of proposed disposal is approx $4.7m. Expect RH Energy to come into focus, given the recent focus on penny stocks with corporate activity. At $0.16, the counter trades at a 30% discount to the $0.23 pre-consolidation RTO transaction price.