OEL 13.9 CENTS TO 0.085: Cause of concern or unwarranted sell-off?
I must first qualify that I am a frequent punter/ stockholder of OEL (formerly known as Oakwell) for the past few years. I sold off the counter last year and only re-entered the market recently during the resurgence of the share.
I am vested 470 lots at an average price of 0.112cents, and look at the closing price today of 0.091 I am losing at least 10k. a lot of other punters/shareholders have been selling off, should I be concerned?
Let us make sense of some of the major milestones of the company + major finanicial data (such as NTA) + reasons for huge sell-off and the Outlook for the share.
Major Announcements:
1. Project Bungalow (go to Oakwell not OEL, see 21st August 2013): In essence OEL sold almost all its business to Sonepar for USA 70 million which was at that time a very good price as it overvalued Oaks at a much higher premium.
INTENDED USE OF THE PROPOSED DISPOSAL PROCEEDS
It is the intention of the Directors to deploy the proceeds from the Proposed Disposal to fund future acquisitions and its working capital, consider reducing its bank borrowing and provide a dividend distribution.
FINANACIAL DATA (TAKEN FROM SAME ANNOUCEMENT):
BEFORE DISPOSAL AFTER DISPOASL
NTA 29.6 MIL/ 668 MIL SHARES = 4.42CENTS 77.3 MIL/ 668 MIL SHARES = 11.6 cents
EPS -4.38 cents +0.83 cents
PURE GAIN ON disposal 44.3 million
Let us analyze the effects of this:
What is good?
A.Huge profit/ premium thus unlocking value
The disposal is a SUPER announcement because just look at the NTA this in essence means in cold hard cash terms, should company pay all buy or go bust: each shareholder will still get 11.6 cents. I don’t see how 0.091 cents is even accurate. Of course I understand NTA, and book-ratio etc is not as simplistic but all I am saying is the broad sell-off is unwarranted because the company worth won’t disappear overnight + even if company goes bust: we are still protected by 11.6 cents.
B. Commitment to pay dividend
This is a LEGALLY BINDING commitment. Though the idiot directors have not announced when and how much, they made this commitment and they have to announce some form of dividend. I am expecting at least 1.5 cents (conservative dividend). Assuming share price of 0.10, it represents a 15% dividend yield at the very least. And even then,the cpy will still be flushed with cash. I will be writing to the board of directors ASAP on this matter (please see below)
What is bad? (see point major announcement 2)
1. Sold almost Entire business → in essence OEL by this has become a CASH-RICH but EMPTY SHELL company → red-flag personally for me: I hate shell companies BUT company also said going to ‘New BIZ’ (this is where the perceived disaster starts)
SEE OCTOBER 31 2013: COMPLETION
The Base Consideration for the Proposed Disposal was S$70,000,000.00, of which payment of S$60,000,000.00 in cash has been effected today, and the balance of S$10,000,000.00 is being paid into the Retention Account as the Retention Fund in accordance with the SPA.
CASH GUYS CASH OF 60 MILLION!!!!
2. Acquisition of 2 Property Biz CPY (JAN 16)
The immediate reaction to this was the Stock skyrocketed to 0.139 after the lifting of the trading halt.
I do not understand the market reaction. It wasn’t a very good deal but somehow they saw it as a good sign and then bought it all the way to a record of 13.9 cents. In the same day, maybe the market realized it was being retarded sold off all they way to 12.2 cents. I bought at 12.5 and I remb it closed ard 12.5.
This went on and coupled with the lastest USA crisis, the share price has been depressed to a low of 0.085. First, TWO WRONGS DOES NOT RIGHT A WRONG! Is the market retarded? Their unwarranted buy and sell is entirely illogical and sentiment driven.
Now let’s explore if this buying of property is really bad, and if so is the shareholder protected?
First, we must understand that the Directors of the Company decided that instead of distributing all the monies back and closing the company, they CHOSE to begin an ENTIRELY NEW BIZ. This means that they must have a plan but even if they don’t have a plan, if this screws up, I am sure none of them will ever be made directors again simply because they had on their hands a winning hand of 11.6cent per share and committed to UNLOCK SHAREHOLDER VALUE.
Second, bought two property biz for 53.9 million! Paid via 10 million in CASH ONLY, rest of 43.9 million in CONVERTIBLE BONDS.
Logical maths, they still have 70 mil -10 mil or 60 mil-10 mil in cash = that means they have 60 or 50 million in cold hard cash now!
Conversion Price of 0.11 → surely the seller being a seasoned biz man, won’t allow the convertible price to be 0.11 if he didn’t feel it is at least 0.11.
BY THE WAY: FOR THOSE AGAINST THIS ACQUISTION LIKE ME: THEY STILL HAVE TO HAVE OUR APPROVAL → IF YOU ALL GIVE ME NOMINATE ME TO YOUR PROXY WE CAN ASK THE DIRECTORS TO SCREW THEMSELVES ON THIS ISSUE, PAY US STRAIGHT CASH 11.6 CENTS.
Further, I heard this is a RELATED-PARTY TRANSACTION (I QUALIFY this statement I heard, this is not meant to be defamatory) but we can question board on this and test if in it is the BEST INTEREST of the cpy and shareholder!
NEXT LOOK UNDER ‘RATIONALE FOR ACQUISTION’
One company again COMMITED TO GIVE DIVIDENDS!!!
NEXT, COMPANY STATED: diversify into a STABLE and PROFITABLE biz with STEADY CASH FLOW within Steadily Property Market in Singapore + unlock value because of bright outlook of property market.
BUT WAIT!!! Some clowns might ask but isn’t the Singapore PROPERTY market COOLING already? Wa lau we die liao! First this ‘cooling down’ even if it is long term, that applies only to PURE RESIDENTIAL PLAYS. The property bought here which is I think almost fully leased out it’s a hybrid of COMMERCIAL AND RESIDENTIAL- office homes!
NEXT assuming full conversion of bond (this may not happen), the NTA will be 10.93cents!!!! again so even if this was a bad deal, and all goes downhill, we still have 10.93cents of nta vs the current price of 0.091 or worse 0.085
3, Arbitration/ Law Proceedings
Looking at the announcements, it seem that OEL is making claims for COMPENSATION. If I am not wrong, at least 20 million is being claimed conservatively. Even if we win one, this would mean additional CASH!!
Reasons for huge-selff off and Outlook for share:
1. STUPID ACQUISTION OF PROPERTY?? Even if it is ‘stupid’, we can still BLOCK this, this is not set in stone.
2. USA MARKET MELTDOWN?? Are you kidding me? Those people who believe FED tapering is bad in the long run is RETARDED. Essentially FED stimulus is like steroids. Ben bernake that clown keep feeding the market steroids, now he wants to stop it because his steroids is clearly working (improving econ, achieving the effects he hoped for), the market goes into to overdrive and a broad sell down. And why this share become 0.139 to 0.085 makes me clueless. This represents a 63% drop in price. Justified? You decide.
I am a firm believer the stock price is at least 11.6 cents with a more ambitious price of 13cents. Feel free to chime in and counter my points, they may be wrong and I am a novice. I am merely sharing my two cents.
NOW MY PLANS:
I will be writing a letter to OEL, ccing SGX to establish 3 factors:
(1) Property transaction- RELATED TRANSACTION? WHEN IS THE SHAREHOLDER MEETING? CAN WE BLOCK?
(2) Representation to Pay Dividend: WHERE IS OUR DIVIDEND??
(3) Huge-sell down: MARKET MANIPULATION?? INSIDER TRADING???
Regards
ALEX
