Oakwell

Oakwell - Recent interests in the stock could be due to its annoucement in early Sept, where the grp announced that it has entered into an agreement to sell its main distribution business to logistics and electrical equipment distribution group Sonepar. The base consideration of $70m equates to a valuation multiple of 2.45x FY12 P/B, and 8x EBITDA on the distribution business. The sales proceeds may rise to $74.5m if there are no subsequent write-offs. Based on FY12 figures, Oakwell’s book value will swell from 4.42¢ to 11.6¢. The group also stands to reap a substantial disposal gain of $34.9m (5.21¢ per share). Following the expected sale completion by 31 Oct, Oakwell will be left with a smallish and loss-making shipbuilding unit (1H13 revenue: $6.3m). Still, investors may cheer management’s commitment to pay out a special dividend, which we estimate could amount up to 5.6¢ per share (57% of current share price) in a blue-sky scenario. Management also intends to deploy the sale proceeds to fund future acquisitions and working capital and reduce its bank borrowings.