"Rooster" contributed this article to NextInsight

Artivision Technologies
describes itself as providing "innovative computer-vision solutions for driving performance out of video since 2004."

Stock price  1.8c
52-week range 1.3c - 4.7c
Market cap S$25 m
PE ratio --
Dividend yield --
1-year return -56%
Source: Bloomberg
Unfortunately, it has been unable to turn in a profit for at least the past 5 years, despite investor support through rights issues, bond issues and share placements.

It's no surprise that its stock price has slid to rock-bottom.

From a peak of around 25 cents five years ago (Jan 2012), the stock currently trades at 1.8-1.9 cents, translating into a market cap of about $26 million.

In recent weeks, there have been developments which steer the company towards a sharply different direction.

And a major event could take place within the next six weeks (ie by March 15), leading to it becoming a cash-rich shell company.

Some of the players behind the change of direction are the same ones who took stakes in underperforming International Healthway Corp and then were instrumental in driving out its board of directors recently. 

Philip Soh Sai Kiang, as a co-founder of Artivision, was appointed to its board in 2004. He last held the post of non-executive chairman.

He owned 59,799,666 direct shares and 183,057,746 deemed shares through his investment vehicle Algotech Holdings, or 18.19% of the issued shares, as at 29 Dec 2016, when he stepped down as an executive director and Chairman of Artivision.

He commenced selling his shares -- in the open market and through married deals -- from 9 Jan 2017 until 25 Jan 2017, when his stake dipped below 5% and he no longer had to announce any further disposal. 

These sales helped to depress the share price to a low of 1.4 cents in Jan 2017. 

On 15 December 2016, Artivision announced that it entered into a non-binding term sheet to entirely dispose its wholly-owned subsidiary, Artimedia, together with Artimedia’s wholly-owned subsidiary, Artimedia Technologies.

The parties to the term sheet shall deal exclusively with each other for three months and negotiate with a view to executing a definitive agreement within the three-month period.  Artivision seeks to divest to an undisclosed third party for S$50m, and expects to book a disposal gain of $38m.

On the back of the announcement, the share price rose to a day-high of $0.031 on 16 Dec 2016.

On 29 Dec 2016, Artivision announced 3 agreements:

i) Placements of 246,913,580 new shares @ $0.0162 to Ching Chiat Kwong (executive chairman, Oxley Holdings) and 30,864,197 new shares @ $0.0162 to Poh Chew Hua Christine to raise an aggregate consideration of $4. 5m.

ChingCK2.17♦ 246,913,580 new Artivision shares @ $0.0162 to be placed to Mr Ching Chiat Kwong, executive chairman, Oxley Holdings (NextInsight photo).

♦ His stake will rise to 24.50%, and he will become the controlling shareholder of Artivision. 
Following the completion of the placement, Mr Ching’s total interest will increase to 395,068,911 shares, representing 24.50% of the enlarged issued and paid-up share capital.

Accordingly, he will become a controlling shareholder of the Company.  

Artivision will be seeking the approval of its shareholders for the proposed share placement to Mr Ching at an EGM on 10 Feb 2017.

Ms Poh has total interest in 13,832,400 shares, representing approximately 1.04% of the existing issued and paid-up share capital of the Company as at 29 Dec 2016.

Ms Poh had previously subscribed for bonds in aggregate principal amount of S$2.0 million issued by the Company. She had extended the repayment date of the bonds to 30 June 2017.  

The 30,864,197 placement shares to be issued to Ms Poh represent 2.26% of the enlarged paid-up share capital of the Company.  

ii) 6-months maturity at 10% p.a. interest of bond subscription agreement of $4.875m by Eric Low See Ching ($2.875m via offset of previous bond outstanding and issued on 31 Dec 2015 to be subscribed not later than 30 Dec 2016) and Tee Wee Sien ($2m to be subscribed not later than 19 Jan 2017).

Both are substantial shareholders of Oxley.

iii)  The grant of share options of 370,370,370 each to Eric Low and Tee Wee Sien, to subscribe for new shares @ $0.0162 before 29 Dec 2019 and 18 Jan 2020, respectively.

The Company intends to utilise the placement net proceeds and the bonds net proceeds of S$9,275,000 for the following purposes: 

(i) S$2,875,000 to partially redeem the December bonds due on 30 December 2016;  

(ii) approximately S$3,000,000 as advance payment to a publisher in Israel for purchase of video viewership for contract signed by the Company’s subsidiary, Artimedia Technologies Ltd, in April 2015; and   

(iii) the balance for the Group’s general corporate and working capital purposes.

After the placements and the disbursement of the bonds and before the exercise of options, the total number of issued shares would increase to 1,612,607,801.

As at 30 sept 2016, company had a convertible loan of S$4.65m and bond payable of $4.4m (total $9.05m) versus cash and cash equivalents of $4.76m.

After raising the proceeds of approximately S$9,275,000 and paying off $3m for advance payments, Artivision would have outstanding borrowings of convertible loan of S$4.65m and bond payable of $6.4m (total $11.05m) versus cash and cash equivalents of $11m (roughly equal to its total borrowings).

If Artimedia is sold for $50 m cash, Artivision would have: 

♦ net cash of $50.4m to $60.4m, assuming the exercise of 770,740,740 options @ $0.0162 each.  That's 2.22 - 2.6 cents net cash a share, which is higher than the current stock trading price.
Assuming the sale of Artimedia for $50m for cash (expected sale and purchase agreement by 15 March 2017 latest), and assuming the exercise of 770,740,740 options @ $0.0162, the company would have net cash of $50.4m to $60.4m.

There is a range of cash in my estimate because I have utilised the Sept 2016 numbers, and not 31 Dec 2016 numbers (as the latter have not yet been announced), and made some assumptions such as that about the cash burn rate of Artivision.

On a shareholder base of 2,353,348,541 shares, that would translate into net cash of 2.22 - 2.6 cents a share. Note that does not include the value of its possible shell listing status.

And Artivision would still be owning a residual contract manufacturing business - Colibri Assembly (Thailand) - in Thailand after selling Artimedia.

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#4 AnJu 2017-02-06 08:49
Surema: I agree with your cautionary message. Still, we should consider case by case. What was Addvalue's business and who was the target buyer? was the valuation fair? Many things need to be looked into. I don't know the full answers for Artivision's case either, actually! the S$50 million figure is more achievable than Addvalue's $200m. On top of that, Artimedia's business is achieving traction.
#3 Surema 2017-02-05 09:06
Look at Addvalue Tech, wanted to sell it's business for $200M.. close to 3 years later , looks like not happening.

"Assume sale / purchase has solid chance of going thru" = assumption is mother of all mistake
#2 AnJu 2017-02-04 20:47
Assume sale / purchase has solid chance of going thru. What else is in the game plan of Ching and Low? Can't end there. What's the sale of shell company for? A couple of million bucks. Not enough to cover Ching's average cost of shares in Arti. There must be something beyond .... imho
+1 #1 Huy 2017-02-02 09:48
Thank you for sharing the potential upside. The question whose answer that can only be truly known after the event is, How likely will Third Party purchase Artimedia for S$50 million? We don't know who Third Party is. We don't know the valuation .... just to point this out.

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