Chip Eng Seng

Spin off of construction business.

http://www.nextinsight.biz/index.php/sto...n-division

http://infopub.sgx.com/Apps?A=COW_CorpAn...siness.pdf

Announcement made by CES on 4 Dec 15 (Fri)

[color=rgba(0, 0, 0, 0)]PROPOSED RESTRUCTURING OF THE CONSTRUCTION BUSINESS[/color]

The board of directors (the “Board” or the “Directors”) of Chip Eng Seng Corporation Ltd.
(the “Company” and, together with its subsidiaries, the “Group”) wishes to announce that
the Company is proposing a spin-off (the “Proposed Spin-off”) of its subsidiaries in the
construction business (the “Spin-off Group”), and a listing of the construction business (the
“Proposed Listing”) on the Singapore Exchange Securities Trading Limited (the “SGX-ST”)
(the Proposed Spin-off and the Proposed Listing collectively referred to as the “Proposed
Restructuring”).

The Company has appointed United Overseas Bank Limited as the financial adviser in
relation to the Proposed Spin-off and the issue manager in relation to the Proposed Listing.
Pursuant to a submission made by the Company to the SGX-ST and based on the
representations made, the SGX-ST has advised that, subject to the Company being able to
demonstrate that its management team and Board is separate and distinct from that of the
Spin-off Group, it has no objections to the Proposed Spin-off. The SGX-ST, however,
reserves the right to amend and/or vary the above confirmation/decision, and such
confirmation/decision is subject to changes in the SGX-ST’s policies.

The Board wishes to highlight that the Proposed Restructuring is in its preliminary stages
and is dependent on, inter alia, the results of preparatory work to be undertaken, the
requisite approvals/consents from the relevant regulatory authorities and the then-prevailing
market conditions. The Proposed Restructuring is also subject to, inter alia, the approval of
shareholders of the Company (“Shareholders”) at an extraordinary general meeting of the
Company to be convened. Accordingly, there is no assurance that the Proposed
Restructuring will materialise in due course. The Company will announce any material
developments on the Proposed Restructuring as and when appropriate.

In the meantime, Shareholders and other investors are reminded to exercise caution
when dealing in the securities of the Company. Shareholders and potential investors
who are in any doubt as to the action they should take should consult their
stockbroker, bank manager, solicitor, accountant or other professional adviser.

BY ORDER OF THE BOARD
Hoon Tai Meng
Executive Director and Group Chief Executive Officer
4 December 2015

hmmm I wonder what is their motivation other than capital raising from the market? The construction biz is not gonna be given much of a higher valuation.


First Raymond leave.


then now Spin-off Construction arm


Looks like they are breaking up the company bit by bit.

This is the part which I can't comprehend.
1. Listing not likely to garner more equity capital, given the current economic conditions.
2. Is the sum of parts greater than sum of the whole?
3. I was reading that the boards of CES and the new spin off would be separate. Then who would be the next top gun? Raymond makes a come back? Quite puzzling. As it is, the current CES has not found a real ceo to replace Raymond and Mr Hoon feels more like standing in still. Just my view.

Seems like minority shareholders may not benefit, unless everyone gets a share in the new spin off. :|

This is great news. CES is trading as a whole at around 0.4x RNAV. The listing of construction arm should be comfortably well above that level. I remember Soilbuild listed at significantly higher than its NAV. In fact, it's now trading at 1.8x NAV. No matter how you look at it, listing the construction arm would help to realise CES's value. Imagine the full valuation if the company is actually broke up piece by piece?

Besides, the news on spin off of their construction arm. With the minimum of 4 cents dividends and the revaluation of park hotel @ Alexandra both expected to be in 4QFY2015, last traded price of 67.5 cents translated to dividend yield of 5.9% or more, and price to book of 0.57x and annualized pe of 6-7x. Furthermore, their 60% stake of 1,400 units of highpark residence is already 91.5% sold and revenue recognition will happen progressively for the next 2 to 3 years.

vested

Just checking/confirming, is the minimum 4cents dividend a permanent thing and is it sustainable?

The 4 cents dividend is not a minimum. Its the historic ordinary dividend rate. Sustainable or not, it depends on the earnings for the year and the management ultimately decides.

I still can't quite figure out the "motive" of this spinning off thingy. Is it a bit like Boustead Singapore that spun off Boustead Projects? At least in that case, the CEO came out to explain why they did it. Anyway, after the spin off and giving shareholders the full stake as dividend in specie, the share price of both BSL and BPL went south - worse than before the spinning off. Does anyone know if CES came up front to explain why they are doing this business gymnastics? Thanks.

If I am not wrong, CES was listed with construction as its main biz during 99. So now spinning off its construction arm sounded like listing it a second time.

If construction is going to decline over the next few years, spinning it off now can still get better valuation and get it of its balance sheet.