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"JAYA has much stronger balance sheet today, so pay up, IHC'
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Written by Value Investor
Wednesday, 25 January 2012 17:31
Value Investor, who used to work in corporate finance and is vested in Jaya Holdings shares, contributed the following article to NextInsight


shipbuilding
Jaya engages in ship building, chartering, and management businesses. The company is primarily involved in owning and chartering offshore support vessels to industries such as offshore oil and gas, and marine construction.


IHC Merwede, the world's biggest builder of dredgers, had shared in December 2011 that they were keen to acquire a Southeast Asian shipyard.

The Dutch company revealed that it was eyeing targets in Singapore and Vietnam.

President Govert Hamers confirmed their interest in a Bloomberg interview conducted in Singapore as the group sought to be "more cost effective" in serving its customers.

jaya_chart_2012
Jaya stock closed at 55 cents today and has a market cap of S$425 million. Chart: Yahoo!
This development was also reported by ASIASIS, the news service for the Asian Shipbuilding industries.

IHC Merwede expects to close at least one deal by Jun 2012. This is in line with the group's plans to expand internationally and grow by 50% in the next five years.

Jaya Holdings is 54.7% owned by Cathay Asset Management, a consortium led by Deutsche Bank.

The consortium acquired the stake from Affinity Equity Partners in February 2011 for S$202.6 million under a loan default.

When Cathay bought the stake, it triggered a mandatory unconditional cash offer for the remaining shares.

As it was a requirement under the rules and Cathay had no intention to privatize Jaya, the offer made was merely procedural.

As expected, the consortium's flimsy bid at a 27% discount to its last traded price of S$0.66 fell through and Jaya stayed listed.

Kim Eng Corporate Finance, the independent financial advisor also advised minorities not to accept the offer then because it valued Jaya too cheaply.

Given Jaya is controlled by a financial investor, there is a possibility that it could be sold "lock stock and barrel" at the right price. Its NAV grew by 16.8% to S$0.72 cents for the financial year ending Jun 2011.

Its earnings was S$0.1086 per share. As Jaya is not in distress and has a much stronger balance sheet today, the Deutsche-led consortium could hold out for a price close to, or even at a premium, to NAV.

So if bidders such as IHC Merwede are serious about privatizing Jaya, a good offer would have to be tabled.

Related report today: JAYA 'likely' to be taken over; STX OSV fair value is $1.60, BROADWAY'S loss 'worse than expected'

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