This Company’s Rights Issue Oversubscribed: Free Float Surges from 11% to 45% as Investors Pounce on Deep Discount

CH Offshore Ltd., established in 1976 and headquartered in Singapore, owns and charters offshore support vessels (OSVs) for the oil, gas, and renewables industries.

Its current fleet of six vessels—comprising anchor handling tugs, platform supply vessels, work boats, and lift boats—serves clients across Southeast Asia, and beyond.

After several challenging years marked by losses since FY2020, CH Offshore achieved a turnaround in 2024, posting a profit of US$1.3 million and an EBITDA of nearly US$7 million.

This recovery was driven by improved operational efficiency, among other factors, and particularly a resurgence in charter rates due to tight vessel supply and robust demand from offshore energy projects.

US$’000	FY24	FY23	FY22	FY21
Revenue	26,229	24,094	18,599	15,520
Gross profit/(loss) after direct depreciation	6,160	(717)	2,304	(634)
Profit/(loss) after tax	1,317	(8,249)	(3,331)	(4,954)
Gross profit/(loss) margin	23.5%	-3.0%	12.4%	-4.1%

In Feb 2025, CH Offshore launched a 2-for-1 rights issue, offering new shares at S$0.01 each—a steep discount to the pre-announcement price of S$0.046.

Results of the issue released on 18 June showed it was heavily oversubscribed, with only 115 million shares left unsubscribed, while excess demand reached 1.1 billion shares.

As a result, the company’s free float rose from 11% to 45%, significantly improving liquidity and broadening the shareholder base.

The remaining 55% is owned by Singapore-listed Baker Technology (whose $111 million market cap, by the way, stands way below its cash level, which is a story for another time).

CHOffshore chart6.25

Post-Issue Financial Position

Market Valuation:
- Current share price of $0.015 values the company at $31.5 million (2.1 billion shares × $0.015).
- Net cash stands at $16 million, representing half the market cap.
Book Value Analysis:
- New book value = $0.032 per share, placing the current price at a 53% discount.
- Historically, shares traded at a 40% discount to book value pre-rights ($0.046 vs. $0.077 book value).
Free Float Impact:
- Public float surged from 11% to 45% post-rights, enhancing liquidity.

Market Dynamics and Outlook

The capital raise generated $14 million for the company, yet market cap declined from $32.3 million (pre-rights) to $31.5 million despite the cash injection.

This disparity stems from:

Overhang pressure: Investors who secured rights shares at 1 cent may sell for quick profits (current price: $0.015= 50% gain).
Valuation disconnect: The stock trades at a steeper discount to book value (-53% approximately) than the historical -40%, suggesting potential upside to $0.02 (40% discount to $0.032 book value).

The rights issue strengthens CH Offshore's ability to seize opportunities to enhance its vessel fleet:

"Strengthening the balance sheet now gives the Company flexibility to move quickly when suitable, younger second-hand vessels become available; to place orders for new builds or initiate specification upgrades when pricing and design clarity improve; and provide the financial comfort that sellers, shipyards and financiers typically require.

"Management expects charter rates to improve going forward. Historically, there has been minimal new vessel construction over the past 10 years, resulting in a limited supply of offshore support vessels. This supply constraint, coupled with sustained demand in the offshore oil and gas sector and emerging opportunities in renewables, supports a positive outlook for charter rates."
-- CH Offshore (source: EGM minutes)

Long-term value hinges on whether the market reappraises the stock toward its historical discount-to-book norm and whether CH Offshore delivers improved results that ride on the booming charter rates.

For more on the fundamentals, see our recent story: CH OFFSHORE: Cash-Rich Comeback in Booming OSV Sector

This Company’s Rights Issue Oversubscribed: Free Float Surges from 11% to 45% as Investors Pounce on Deep Discount

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