OEL

OEL (formerly Oakwell Engineering): Lifts halt at 8.30am. OEL entered into a heads of agreement to acquire two property investment companies in S’pore from a vendor linked to Heng Fai Enterprises, which is helmed by high profile deal maker Chan Heng Fai. The consideration of $53.9m will be satisfied by payment of $10m in cash, and the issue of $43.9m of secured convertible bonds. The names of the target companies, Singapore Service Residence and Expat Residences, suggest exposure to the hospitality segment. The combined portfolio of properties held include 27 SOHO units and one retail unit located at North Bridge Road, with aggregate area of 28,733 sf and 7 residential units at Dakota Crescent condo with aggregate area of 12,852 sf. As at FYMar13, both target cos had a combined net asset of $42m and were just about breakeven. Based on proforma FY12 numbers, OEL estimates that post-acquisition, its NTA will rise from 4.42¢ to 10.93¢, and EPS to rise from -4.38¢ to 0.11¢. Following the disposal of its core distribution business, OEL mgt believes the company should diversify into a stable and profitable business with steady cash flow within the steadily growing property market in Singapore.