Wednesday, January 29, 2014


OEL: Counter had a case of profit taking after announcing a property acquisition deal, which valued the company at an unattractive proforma P/B of 1.2x (based on $0.13/share). Following the news release, share price has now adjusted to a proforma P/B of 0.83x, which reflects the execution risk of the group entering into a new business. Recall on 16 Jan, 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. Based on proforma FY12 numbers, and taking into account the disposal of its distribution business, OEL estimates that post-acquisition, the group’s NTA will rise from 4.42¢ to 10.93¢, and EPS to rise from -4.38¢ to 0.11¢. Nevertheless investors may be hopeful that if Chan fully converts the bonds into 399m new shares at $0.11 each, he will emerge as the new majority shareholder of OEL with a 37.4% stake in the enlarged share base, paving the way for a change of control and a new lease of life for the company.

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