Vallianz

Vallianz: To acquire OER Holdings, a manpower services provider to the offshore industry, for US$27.7m, or 5x EBITDA. The acquisition is expected to improve profitability, as well as to expand its customer base. To fund the acquisition, Vallianz will issue 250m new shares at $0.14 each. Proforma FY13 NTA/share and EPS post-acquisition is estimated to increase by 34% and 35%, respectively, to US4.82¢ and US0.85¢. We are concerned of the group's balloning debt of US$508m and high net gearing of 2.8x, although this has recently been reduced from 4x from a 400m share placement done in Jun. This risk is unlikely to ease given the group's heavy capex requirements for its aggressive fleet expansion in the next two years. At $0.11, Vallianz is valued at FY13 proforma 1.8x P/B and 10.1x P/E.