Eastern Holdings

[fat al]

Actually i was thinking goodwill will be added if the purchase price is above the latest valuation of 27m for hoy fatt

My thoughts are:

Any goodwill to be recorded will depend on the balance sheet of Hoy Fatt Pte Ltd as at the acquisition date. You are right only if the latest valuation is recorded into the books.

1) As at 31 Mar 2013, the carrying value of the building is 13.6m while the fair value is 27m. So if assuming HFPL has a simple balance sheet where book equity = 13.6m on acquisition date (ie no other assets and liabilities; and carrying value of building remains the same), then 30% of 13.6m will be 4.1m minority interest. Since purchase consideration is 7.4m, there will be a goodwill of 3.3m.

2) Another possibility is that the accountants wanted to recognise the fair value gain in HFPL books between 31 Mar 2013 and acquisition date. In between, a gain of 13.4m (being 27m - 13.6m) will be recognised as a gain in HFPL and EH Group books (with corresponding adjustment to minority interest). Assuming again that the book equity is now 27m, then MI 30% will be 8.1m. Since 7m consideration is less than 8.1m, a negative goodwill of 1.1m (8.1m - 7m) will need to be recognised as a gain on acquisition. In other words, there will be no goodwill "asset" on the balance sheet post acquisition. For discussion purpose, if the cash consideration is 9m, then the goodwill to be recorded on the balance sheet will be 0.9m (being 9m - 8.1m).

One more thing to ponder:
Above assumes that HFPL has no other assets and liabilities. However, if you look at FY13AR, the minority interest is only 432k. Since HFPL is the only subsidiary that is not wholly owned, it is likely that the book value of HFPL is only 1.4m (432k/30%) as at 31Mar2013. How does this reconcile with the carrying value of 13.6m? My guess is that the big difference is due to net liabilities, possibly shareholders loans. If this conjecture is correct, it is likely that some capital restructuring has taken place since financial year-end to convert shareholders loans to equity. To take the point further, the 7.4m consideration may not imply a discount to asset value of 27m because the acquisition is for 30% stake of the company HFPL (not for the building) which may carry some net liability in addition to the building.

[smallcaps]

Actually i was thinking goodwill will be added if the purchase price is above the latest valuation of 27m for hoy fatt

My thoughts are:

Any goodwill to be recorded will depend on the balance sheet of Hoy Fatt Pte Ltd as at the acquisition date. You are right only if the latest valuation is recorded into the books.

1) As at 31 Mar 2013, the carrying value of the building is 13.6m while the fair value is 27m. So if assuming HFPL has a simple balance sheet where book equity = 13.6m on acquisition date (ie no other assets and liabilities; and carrying value of building remains the same), then 30% of 13.6m will be 4.1m minority interest. Since purchase consideration is 7.4m, there will be a goodwill of 3.3m.

2) Another possibility is that the accountants wanted to recognise the fair value gain in HFPL books between 31 Mar 2013 and acquisition date. In between, a gain of 13.4m (being 27m - 13.6m) will be recognised as a gain in HFPL and EH Group books (with corresponding adjustment to minority interest). Assuming again that the book equity is now 27m, then MI 30% will be 8.1m. Since 7m consideration is less than 8.1m, a negative goodwill of 1.1m (8.1m - 7m) will need to be recognised as a gain on acquisition. In other words, there will be no goodwill "asset" on the balance sheet post acquisition. For discussion purpose, if the cash consideration is 9m, then the goodwill to be recorded on the balance sheet will be 0.9m (being 9m - 8.1m).

One more thing to ponder:
Above assumes that HFPL has no other assets and liabilities. However, if you look at FY13AR, the minority interest is only 432k. Since HFPL is the only subsidiary that is not wholly owned, it is likely that the book value of HFPL is only 1.4m (432k/30%) as at 31Mar2013. How does this reconcile with the carrying value of 13.6m? My guess is that the big difference is due to net liabilities, possibly shareholders loans. If this conjecture is correct, it is likely that some capital restructuring has taken place since financial year-end to convert shareholders loans to equity. To take the point further, the 7.4m consideration may not imply a discount to asset value of 27m because the acquisition is for 30% stake of the company HFPL (not for the building) which may carry some net liability in addition to the building.

Wow that's a great explanation! Now I remember... asked at agm about this 3 mil that EHL owes minority interest during the last agm.

[safetyfirst]

yes thanks, this accounting can be quite confusing, i will try to learn from it

[smallcaps]

Once again ST has up-ed the magic price, to 28.5 cents:

2014-01-09 : 303 lots @ 28.5 cents
2013-12-10 : 30 lots @ 28.0 cents
2013-12-09 : 18 lots @ 28.0 cents
2013-12-05 : 30 lots @ 28.0 cents
2013-11-25 : 299 lots @ 27.96 cents
2013-09-05 : 50 lots @ 25.0 cents
2013-09-04 : 362 lots @ 25.0 cents
2013-08-30 : 50 lots @ 24.5 cents
2013-08-28 : 241 lots @ 24.5 cents
2013-08-21 : 45 lots @ 24.5 cents
2013-08-20 : 162 lots @ 24.5 cents
2013-08-16 : 155 lots @ 24.5 cents
2013-08-13 : 12 lots @ 24.5 cents
2013-08-12 : 64 lots @ 24.5 cents
2013-08-06 : 273 lots @ 24.5 cents
2013-08-05 : 31 lots @ 24.5 cents
2013-08-02 : 212 lots @ 24.5 cents
2013-07-31 : 165 lots @ 24.2 cents

[opmi]

Will take a long time and higher prices if take this 'open market purchase' route to privatize EHL.

[smallcaps]

Will take a long time and higher prices if take this 'open market purchase' route to privatize EHL.

Ya, makes me really curious wat is his max price. Some % of discount to RNAV maybe?

[opmi]

Will take a long time and higher prices if take this 'open market purchase' route to privatize EHL.

Ya, makes me really curious wat is his max price. Some % of discount to RNAV maybe?

whatever it is, the disc to RNAV will get smaller when current assets (devt prop & presales receivables) and investment prop converts into cash.

Unless IFA blind one.

[safetyfirst]

Actually if he's sincere about offering a fair price, i also dont want to take advantage of him, i will sure sell my shares to him

[opmi]

At 33 cents, will cost 16m to privatize. Every 10% difference only 1.6m nia.

[brattzz]

at this rate it's going, i think the chances of ST doing a de-capitalization exercise makes more sense than GO?