• Home
  • Investor Education
    • Essential Tips for Stock Investors
    • Using Passive Investing to Beat the Market
    • Recommended Investment Books
    • Key Things to note in Rights Issues
    • Understanding Reverse Takeovers
    • Stock Split vs Bonus Issue
  • Latest Recommendations
    • Abric Berhad
    • Kejuruteraan Samudra Timur
    • Chuan Hup Holdings
    • Falcon Energy Group
    • Memstar Technology
    • Pacific Century Regional Developments
    • Singapore Healthcare Stocks
    • Macquarie Int Infrastructure Fund
    • IPC Corporation
    • Tiger Airways
    • TSH Corporation
    • Bukit Sembawang Estates
    • HG Metal Manufacturing
    • OKP Holdings
    • Global Investments Ltd
    • Baker Technology Ltd
    • Yongnam Holdings
    • Hupsteel
    • TIH
    • Sysma Holdings
    • Sembcorp Industries
Stock Investment Research with an Asian focus

TSH Corporation Ltd- Expect more to come

29/5/2016

 
Picture
Since our initial write-up on TSH, the share price has surged, returning a total of 86% in less than 2 months. Our initial estimates pegged the value of the shares to the sum of its existing net cash and short-term securities position of S$0.077 rising to S$0.139 (S$0.0107 and S$0.169 respectively before adjusting for the 3 S cts dividend it had earlier paid) should the freehold property be successfully disposed. Recent developments, however, suggest that our views have been too conservative.

We now see a strong likelihood of the company monetizing all its assets and distributing the resultant proceeds in the mid to near future. Shareholders should realize total proceeds of at least S$0.151 per share should that happen. This represents a further 29% upside from the last traded price of S$0.117. We remain long at the current price.  

Key developments since our report

  1. TSH announced on 28 April 2016 following its AGM that it had entered into a sale and purchase agreement with Exact Solution Management Ltd to dispose of its Consumer Electronics business carried out under its wholly owned subsidiary, Wow Technologies (Singapore) Pte Ltd. The consideration is US$2.4 million or S$3.24 million. It intends to distribute 100% of the net proceeds from this sale to shareholders. 
  2. Concurrently, the Company has entered into a non-binding term sheet with its CEO, Anthony Lye, for the disposal of its Homeland Security Services business, consisting of its wholly owned subsidiary, Starmo International Ltd as well as subsidiaries under Starmo. The consideration shall be in cash and is to be agreed by the Company and Anthony  subject to a valuation report to be prepared and issued by an independent valuer. 
  3. Company revealed in its annual report for FY 2015 in regard to its 26.5% stake in Unilink Development Limited that “Following the plan of the Company in 2015 to dispose of the investment in Unilink, the Company has followed up with a concrete plan to locate buyer and is of the view that the sale is highly probable to be completed within a year.” Consequently, the value of the Unilink stake has been written down to S$3.127 million as an estimated recoverable amount based on discussions with third parties. 

Our Take

Twin disposal of Consumer Electronic Business and Homeland Security Business leaves TSH with no core businesses and removes key cash drain risk

Coupled with the company’s decision not to actively pursue any property development projects after the disposal of its Australian properties, TSH is set to become a cash company upon the completion of the twin disposals of Wow Technologies and Starmo.

We previously flagged out the consumer electronics business, which incurred a loss of S$2.73 million in 2015, as the prime risk to TSH’s cash pile. Thus, we see its proposed disposal as positive news for shareholders even though the consideration of S$3.24 million would result in a non-cash disposal loss of S$0.37 million. The resulting cash distribution from this sale is estimated to be 1.3 S cts per share, representing 11% of the last traded price of S$0.117.

At the same time, we think the disposal of its Homeland Security Business, Starmo, should generate proceeds no less than the net carrying value of its tangible assets given that this division has consistently generated profits, albeit declining, over the last 3 financial years.

However, net realisable value of Unilink stake may be lower than book value

Although the Company has estimated that the recoverable value of the 26.5% stake in Unilink to be S$3.13 million, we note that Malaysia-listed Metronic Global Bhd recently disposed of a 17.7% stake in the same company for just US$551,724. Should the sale of TSH’s stake in Unilink be transacted at a similar valuation, the consideration it eventually receives may be closer to S$1.15 million (US$:S$=1.380), representing an S$1.98 million deficit over its current book value. 

Net Breakup Value is likely to become key share price driver going forward

With the latest announcements, we think that TSH will eventually dispose of all its key assets and businesses and return the proceeds to shareholders. As such, the focus for shareholders should shift towards TSH’s net breakup value as its assets will eventually be converted into cash.
Picture
Picture
Recommendation

Even though the share price of TSH has surged since our initial report, recent developments suggest that more upside may be installed for its shareholders. The pace of the disposals and distributions would likely drive share price going forward. Nevertheless, shareholders should eventually realise no less than our conservative estimate of TSH’s net breakup value of S$0.151 per share, representing an upside of 29% over the last traded price of S$0.117.

Further upside could come either in the form of a higher selling price of TSH Centre, Starmo or the stake in Unilink as we have assumed undemanding considerations for each of these assets. As an example, should TSH sell its property at say 909 psf which is the current lowest asking price of comparable properties in the vicinity, the net breakup value could rise to S$0.169 or 44% above the current share price.

We continue to be buyers at this price. 
    Like our Facebook page for the latest updates:
    Follow @StockResearchA
    RSS Feed Widget

    Author

    StockResearchAsia Team

    Archives

    June 2020
    November 2019
    July 2019
    June 2019
    March 2019
    January 2019
    September 2018
    June 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    September 2017
    July 2017
    June 2017
    February 2017
    September 2016
    May 2016
    March 2016
    January 2016
    December 2015
    November 2015
    September 2015
    August 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015

    Categories

    All
    Abric Berhad
    Asia Enterprises Holding Ltd
    Bukit Sembawang Estates Ltd
    Bursa
    Ch Offshore Ltd
    Chuan Hup Holdings Ltd
    Corporate Action
    E2-Capital Holdings Ltd
    Falcon Energy Group Ltd
    Finbar Group Limited
    Healthcare Sector
    Health Management International Ltd
    HG Metal Manufacturing Ltd
    Hkt
    Hupsteel Ltd
    Ipc Corporation Ltd
    Ipos
    Irving Kahn
    Jaya Holdings Ltd
    Kejuruteraan Samudra Timur Berhad
    Keppel Corporation
    Macquarie International Infrastructure Fund
    Memstar Technology Ltd
    OKP Holdings Ltd
    Pacific Century Regional Developments Ltd
    Pccw Ltd
    Pci Ltd
    Pcpd Ltd
    Privatisation
    Raffles Medical Group Ltd
    Rtos
    Scomi Energy Berhad
    Sembcorp Industries
    Sembcorp Marine
    Sgx
    Singapore Airlines Ltd
    Singapore O&G Ltd
    Special Situations
    Sysma Holdings
    Takeover Offer
    Talkmed Group Ltd
    Tiger Airways Holdings Ltd
    TIH Ltd
    Tsh Corporation Ltd
    Value Investor
    Year End Review
    Yongnam Holdings Ltd

    RSS Feed

IMPORTANT NOTICE
We put money where our mouth is. As such, we do take positions in the securities mentioned on this website or any securities related thereto and may from time to time add or dispose of or may be materially interested in any such securities. The research materials provided on this site is for information only. Investors should seek the assistance of a qualified and licensed financial advisor in making their investment decisions. The research reports/notes are compiled based on information, which we believe to be reliable. Any opinions expressed reflect our judgment at as at the date of the reports or notes and are subject to change without notice. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive or access this research material. Our recommendations are not to be construed as an offer, or solicitation of an offer to sell or buy securities referred herein. The use of this material does not absolve you of your responsibility for your own investment decisions. We accept no liability for any direct or indirect loss arising from the use of this research material. This research material may not be reproduced, distributed or published for any purpose by anyone without our specific prior consent.