Homepage
PR Newswire
20-05-2022, 11:07 PM
The company just posted its own announcement about DeClout's offer as well: https://links.sgx.com/1.0.0/corporate-an...dc8a8ba63f.
On page 1 it discloses that CEO Thomas Sean Murphy sold his entire stake to DeClout today. As a reminder, Murphy agreed to the failed lowball offer of $0.365 per share from Novo Tellus in 2021. Does that indicate that Novo Tellus perhaps agrees with DeClout's actions? Would Murphy do anything to upset Novo Tellus?
I think shareholders should keep strongly in mind that a true third party, Park Place Technologies, made a USD $115m (~SGD $155m) offer in 2019 for just the third party maintenance (TPM) division! See: https://www.businesstimes.com.sg/compani...iness-unit. DeClout's $0.425 per share offer only translates to a ~SGD $126m market cap. Why sell to DeClout for a price that probably still falls well short of the true value of just the TPM business?
Of course, Procurri has another valuable and growing division called "Hardware, Lifecycle Services and IT Asset Disposition", further enlarging the discount between this offer and the intrinsic value of the company.
The independent financial adviser (IFA) will make a recommendation to the Board about DeClout's offer within 14 days. In my opinion, any recommendation that is based on NAV, or a P/E ratio should be dismissed by shareholders. NAV and a P/E ratio are what the IFA used in Novo Tellus' lowball partial offer in 2021 of $0.365.
Please see my previous post about the reclassification of maintenance parts and how this has depressed earnings and NAV in the last couple of years. That clearly shows that Procurri's NAV or a P/E ratio do not reflect the true value of the business.
The IFA's recommendation should instead focus on:
- Procurri's true earnings power: this is reflected by the free cash flow that the business has generated over the last few years. Free cash flow can be calculated by taking "Net cash generated from operating activities" in the company's cash flow statement and deducting the capital expenditures, as reflected by the "Purchase of plant and equipment" in the cash flow statement. This number can fluctuate significantly from year to year, due to working capital movements, so it's important to look at a period of a few years to smooth these movements out. Of course growth should be taken into account as well by shareholders and the IFA, as Procurri is likely to grow these numbers in the future.
- The value to a third party buyer: Park Place's offer in 2019 is a good indication of the value of just the TPM segment. Park Place was, and is, a very credible buyer and is still very acquisitive today. The company recently mentioned several third parties had expressed interest in assets, so perhaps we'll learn more about that in the IFA's recommendation.
Sorry for the long post.
I just think minority shareholders should stick together and really look with a critical eye at DeClout's offer and any future offers. I have not sold a share and think Procurri's value well exceeds DeClout's offer.
On page 1 it discloses that CEO Thomas Sean Murphy sold his entire stake to DeClout today. As a reminder, Murphy agreed to the failed lowball offer of $0.365 per share from Novo Tellus in 2021. Does that indicate that Novo Tellus perhaps agrees with DeClout's actions? Would Murphy do anything to upset Novo Tellus?
I think shareholders should keep strongly in mind that a true third party, Park Place Technologies, made a USD $115m (~SGD $155m) offer in 2019 for just the third party maintenance (TPM) division! See: https://www.businesstimes.com.sg/compani...iness-unit. DeClout's $0.425 per share offer only translates to a ~SGD $126m market cap. Why sell to DeClout for a price that probably still falls well short of the true value of just the TPM business?
Of course, Procurri has another valuable and growing division called "Hardware, Lifecycle Services and IT Asset Disposition", further enlarging the discount between this offer and the intrinsic value of the company.
The independent financial adviser (IFA) will make a recommendation to the Board about DeClout's offer within 14 days. In my opinion, any recommendation that is based on NAV, or a P/E ratio should be dismissed by shareholders. NAV and a P/E ratio are what the IFA used in Novo Tellus' lowball partial offer in 2021 of $0.365.
Please see my previous post about the reclassification of maintenance parts and how this has depressed earnings and NAV in the last couple of years. That clearly shows that Procurri's NAV or a P/E ratio do not reflect the true value of the business.
The IFA's recommendation should instead focus on:
- Procurri's true earnings power
- and the value of the business to a true third party buyer like Park Place
- Procurri's true earnings power: this is reflected by the free cash flow that the business has generated over the last few years. Free cash flow can be calculated by taking "Net cash generated from operating activities" in the company's cash flow statement and deducting the capital expenditures, as reflected by the "Purchase of plant and equipment" in the cash flow statement. This number can fluctuate significantly from year to year, due to working capital movements, so it's important to look at a period of a few years to smooth these movements out. Of course growth should be taken into account as well by shareholders and the IFA, as Procurri is likely to grow these numbers in the future.
- The value to a third party buyer: Park Place's offer in 2019 is a good indication of the value of just the TPM segment. Park Place was, and is, a very credible buyer and is still very acquisitive today. The company recently mentioned several third parties had expressed interest in assets, so perhaps we'll learn more about that in the IFA's recommendation.
Sorry for the long post.
I just think minority shareholders should stick together and really look with a critical eye at DeClout's offer and any future offers. I have not sold a share and think Procurri's value well exceeds DeClout's offer.