CH Offshore

[ngcheeki]

Analyst report from L&T

Falcon Energy (23.5 cents, trading halt) which owns 29.07% of CH
Offshore (46.5 cents, trading halt) has launched a voluntary conditional
cash offer (VCCO) for the remaining shares that it does not own at
49.5 cents each, representing a 6.5% premium to its last traded price
and 8.3% premium to the volume weighted average price in the past
1 month.
If successful, CH Offshore will become a subsidiary of Falcon Energy.
This will enable Falcon Energy to explore opportunities to unlock
synergistic value in the CH Offshore Group’s businesses. In addition,
it will also allow Falcon Energy an attractive platform to build on its
businesses in offshore support services.
In the event that Falcon Energy obtains a majority control of Ch Offshore,
the company intends to undertake a review of the group’s entire
offshore marine business and may embark on programmes to optimise
effi ciency in the business operations and the capital management of
the enlarged group.
Falcon Energy currently intends to maintain the listing status of CH
Offshore on SGX, however, in the event that the free fl oat of the
company falls below the 10% statutory requirement, it reserves the right
to re-evaluate its position, including exercising its right to compulsorily
acquire the outstanding public shares.
CH Offshore’s largest shareholder Chuan Hup together with Chuan
Hup’s founder Peh Kwee Chim who owns 30.61% of the company
(6.23% direct interest and 24.38% deemed interest) have not given
irrevocable undertaking to vote in favour of the offer. The market may
thus start speculating that Chuan Hup and Peh Kwee Chim may also
be thinking of launching their own bid for CH Offshore.
Falcon Energy’s VCCO is conditional upon the company obtaining
by the close of the offer at least 50% of CH Offshore’s outstanding
shares, implying at least 20.93% acceptances before the offer will turn
unconditional.
Falcon Energy’s original stake of 29.07% stake in CH Offshore was
acquired from Scomi Marine Services in Feb’2010 at 70 cents a share.
Since then, they have received about 15 cents worth of dividends,
reducing their cost to about 55 cents a share.
At 49.5 cents a share, CH Offshore is valued at $349mln, giving it a
historical PE of 10.6x and price to book of 1.1x. While an opportunistic
move amidst the overall carnage in oil and gas related stocks, given
CH Offshore’s historically generous dividend track record (4 cents paid
last year consisting of 2 cents special and 2 cents normal) coupled with
Chuan Hup’s potential counter bid, we believe it may not be easy for
Falcon Energy to succeed in taking control of CH Offshore.

Not vested