RH Energy

RH Energy: Voyage says stock is a Convincing Gem, tips potential value of $0.83 (post 3-into-1 share consolidation). RH Energy will acquire Chiwayland for consideration of $399m, in exchange for Chiwayland shareholders owning 81.1% of the enlarged share capital of RH Energy (549.3m new consolidated shares @ $0.69 issue price) and a cash component of $20m. Chiwayland Group is seeking a listing on SGX via an RTO of RH Energy. Chiwayland is a China property developer that has 1) proven track record of property development in Yangtze River Delta since 2002, and has delivered a total GFA of 1.4m square metre for its nine completed projects, with opportunity coming from saleable GFA of 2.3m square metre that is held under development, 2) integrated educational element into real estate planning, such as collaboration with EtonHouse International Education Group, therefore differentiated itself from other developers and 3) diversified its portfolio into China’s public housing projects which may generate steady revenue in the future. Voyage believes that the RTO may offer value as Chiwayland has been able to generate positive PATMI for the past few years (PATMI for FY13:RMB109.0m, FY12:RMB89.6m, FY11:RMB87.1m). Based on the company’s project pipeline, the house is optimistic about the company’s profitability going forward as the contracted sales to be recognized as revenue in FY14 and FY15 is ~ RMB1.2b for each year.