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I have been investing in SG stock market for nearly 30 years and I have been in the financial industry as an analyst, fund manager and CIO for more than a decade. I have yet to come across an IFA recommendation as ridiculous as Ossia's. I have a friend who knows the IFA people , so I only comment on their recommendation now (after much consideration).
(A) Ossia's NAV = $0.22 (Mar 2024). As any investment banker knows, NAV is one of the metrics to consider as evaluate the reasonableness & fairness of an offer. The offer price of $0.145 is at a discount of 34% from NAV
(B) The offer price is barely 20% over the last traded price of $0.12. Considering that it is an illiquid and low-price counter, any price increase over the last traded price will look large in percentage term. And if 20% premium is considered substantial by the IFA, then GE and Second Chance's offer price premium of 39-42% over last traded price are considered... astronomical? Isetan's offer price premium of 173% must be hyper-astronomical?
© Harvey Norman Australia trades at PER 16x, above NAV with a market cap of $6bn. Courts (2019) , Challenger (2019, 2023) and Pertama (1999, 2011, 2013) were acquired/delisted from SGX in the respective years (in brackets). The offer for Courts (a net debt company) were deemed Fair but not reasonable by the IFA (KPMG) because the offer price was below NAV (PER 12x). Challenger (net cash but only operating in Singapore) were delisted at an offer price of $0.60, 1.x NAV at PER 13x in 2023 after a failed attempt in 2019 (offer price of $0.56 , 1.x NAV, PER 10x). Pertama itself were delisted at similar valuation metrics over a few attempts. In comparison, the offer price for Ossia (net cash) is at PER 4-5x and more than 30% below NAV. Moreover, the assets of Ossia (NAV) should be worth more than that of those peers because of its stake in Harvey Norman (see below).
(D) Ossia has a 40% stake in Harvey Norman Ossia Asia (HNOA) which owns 49.4% in Pertama Holdings. The value of Ossia's stake in Harvey Norman cannot be simply reduced to a PE muliple of Pertama Holdings' earnings which itself has substantial cash holdings (based on Pertama Holdings' accounts as at 30 June 2023). Currently, Harvey Norman's operations in Malaysia and Singapore are carried out though Pertama Holdings which Ossia has an effective stake of 19.8%. The IFA was right to point out that HNOA has no principal activity but is there any agreement between Ossia and Harvey Norman Australia that any expansion to Asian countries outside Malaysia and Singapore will be carried out through HNOA? If there is, and Harvey Norman were to expand to Indonesia, the Philippines or China, then Ossia's stake in these businesses will be 40% and not 19.8%.
(E) Harvey Norman Australia has pitched Asia (esp. Malaysia) to investors as one its most exciting growth markets. This is not just in 2023 Annual report (as pointed out by SGX) but also in a presentation to investors in 2022. Malaysia is one of few economies in the world in 2024 where local consumption is still going strong. So is Taiwan where Ossia's Great Alps' operations are carried out. Only in Singapore, consumption looks sluggish despite all the vouchers that has been distributed out by the government this year (based on Singstat Retail Sales data and information gleaned from retail REITS' presentation to investors).
Some of the above arguments are forward-looking and valuation of a business is always tricky with a wide range of fair values deemed reasonable. Nonetheless, the above hard-to-refute arguments does call into question the sanity of the IFA's recommendation. It is sad to see that it has taken SGX so long to seek clarification from Ossia on this matter. Despite the IFA report being issued on 16 July, SGX apparently only queried Ossia on 19 August, way almost two weeks after the first offer closing date (8 August). Had the acceptances been forthcoming fast and offer closed on 8 August, SGX's query would be too little too late! It might still be. We have to wait and see!
(A) Ossia's NAV = $0.22 (Mar 2024). As any investment banker knows, NAV is one of the metrics to consider as evaluate the reasonableness & fairness of an offer. The offer price of $0.145 is at a discount of 34% from NAV
(B) The offer price is barely 20% over the last traded price of $0.12. Considering that it is an illiquid and low-price counter, any price increase over the last traded price will look large in percentage term. And if 20% premium is considered substantial by the IFA, then GE and Second Chance's offer price premium of 39-42% over last traded price are considered... astronomical? Isetan's offer price premium of 173% must be hyper-astronomical?
© Harvey Norman Australia trades at PER 16x, above NAV with a market cap of $6bn. Courts (2019) , Challenger (2019, 2023) and Pertama (1999, 2011, 2013) were acquired/delisted from SGX in the respective years (in brackets). The offer for Courts (a net debt company) were deemed Fair but not reasonable by the IFA (KPMG) because the offer price was below NAV (PER 12x). Challenger (net cash but only operating in Singapore) were delisted at an offer price of $0.60, 1.x NAV at PER 13x in 2023 after a failed attempt in 2019 (offer price of $0.56 , 1.x NAV, PER 10x). Pertama itself were delisted at similar valuation metrics over a few attempts. In comparison, the offer price for Ossia (net cash) is at PER 4-5x and more than 30% below NAV. Moreover, the assets of Ossia (NAV) should be worth more than that of those peers because of its stake in Harvey Norman (see below).
(D) Ossia has a 40% stake in Harvey Norman Ossia Asia (HNOA) which owns 49.4% in Pertama Holdings. The value of Ossia's stake in Harvey Norman cannot be simply reduced to a PE muliple of Pertama Holdings' earnings which itself has substantial cash holdings (based on Pertama Holdings' accounts as at 30 June 2023). Currently, Harvey Norman's operations in Malaysia and Singapore are carried out though Pertama Holdings which Ossia has an effective stake of 19.8%. The IFA was right to point out that HNOA has no principal activity but is there any agreement between Ossia and Harvey Norman Australia that any expansion to Asian countries outside Malaysia and Singapore will be carried out through HNOA? If there is, and Harvey Norman were to expand to Indonesia, the Philippines or China, then Ossia's stake in these businesses will be 40% and not 19.8%.
(E) Harvey Norman Australia has pitched Asia (esp. Malaysia) to investors as one its most exciting growth markets. This is not just in 2023 Annual report (as pointed out by SGX) but also in a presentation to investors in 2022. Malaysia is one of few economies in the world in 2024 where local consumption is still going strong. So is Taiwan where Ossia's Great Alps' operations are carried out. Only in Singapore, consumption looks sluggish despite all the vouchers that has been distributed out by the government this year (based on Singstat Retail Sales data and information gleaned from retail REITS' presentation to investors).
Some of the above arguments are forward-looking and valuation of a business is always tricky with a wide range of fair values deemed reasonable. Nonetheless, the above hard-to-refute arguments does call into question the sanity of the IFA's recommendation. It is sad to see that it has taken SGX so long to seek clarification from Ossia on this matter. Despite the IFA report being issued on 16 July, SGX apparently only queried Ossia on 19 August, way almost two weeks after the first offer closing date (8 August). Had the acceptances been forthcoming fast and offer closed on 8 August, SGX's query would be too little too late! It might still be. We have to wait and see!