BBR Holdings

[TTTI]

Yea, all share deal. At $0.31, which is a huge premium to existing share price.
I wouldn't compare it to book value, most construction companies are at a big discount to book value.
To the seller, the book value doesn't mean anything. The current share price when they were negotiating the acquisition, is what concerns the seller.
Also, at $0.31, there's no need to worry about a "lock in" period for the seller. I don't think he'd negotiate based on $0.31, and sell out quickly at $0.21.
Also, no dilution to existing shareholders technically, although the number of shares outstanding will increase.
Overall, a good deal for BBR.
We have to watch the currency risks though, MYR has chronically been weakening against SGD.

On the contrary, there is dilution to the existing shareholders. But it will be minimal as the new shares are
only 5.36% of the current number of shares outstanding.

yes there is dilution, but very little.
Not just because the new shares are a fraction of outstanding shares, but because the shares issued is at $0.31, so it's a premium to the existing share price.
As an academic exercise, let me do the math now:
Currently, BBR has 307,999,418 shares issued. NAV is $0.4248 per share, which means the book value of the whole company is $130,838,153

Post acquisition, total shares issued = 324,499,418.
NAV of the acquired stake is $3,856,000.
So total book value would be $134,694,153
Which is $0.415 per share

So the dilution is from $0.425 to $0.415

BUT, not sure if anyone else noticed this, under 3.1.2

"Under the SPA, the Company and the Vendor agree that BBRM may, prior to Completion, declare, make and pay a final dividend of an amount not exceeding RM28,000,000 to its shareholders in respect of FY2016. "

So this means that the seller can theorectically take out 20% of RM28mil as dividends...
The seller is not selling a controlling stake though, so BBR still decides what dividends to pay out before the acquisition is completed

[TTTI]

Chiu increased his stake to 7%

Acquired remaining 20% of BBR Msia

If I interpreted correctly, they are acquiring the 20% BBR Msia at PE <5 and using BBR Holding new shares to pay for it.
The price of BBR Holding new share is S$0.31.

WAH? seems like very good deal!
Although at S$0.31, it is still lower than Book Value. 
It is arguably that the more logical move is to just buyback BBR Holding shares.
However, it seems to me that Msia is the only unit with meaningful profit and outlook seems to improve.
Maybe that's why.

<vested>

Yea, all share deal. At $0.31, which is a huge premium to existing share price.
I wouldn't compare it to book value, most construction companies are at a big discount to book value.
To the seller, the book value doesn't mean anything. The current share price when they were negotiating the acquisition, is what concerns the seller.
Also, at $0.31, there's no need to worry about a "lock in" period for the seller. I don't think he'd negotiate based on $0.31, and sell out quickly at $0.21.
Also, no dilution to existing shareholders technically, although the number of shares outstanding will increase.
Overall, a good deal for BBR.
We have to watch the currency risks though, MYR has chronically been weakening against SGD.

Since it is a good deal for buyer, then it has to be a bad deal for seller....If i stand from seller's standpoint, why would i want to sell my 20% share of the business at P/E<5 (only based on latest year's earnings) in exchange for shares at 50% premium of its market value? I am suspecting there is some catch (no proof though) and certain portions are overvalued.

Else the only explanation is that seller is desperate to become a BBR Holdings shareholder? (exchange their ever-depreciating MYR denominated asset to SGD denominated asset?)

Not necessarily a bad deal for seller.
Could be a win-win for both.

It's not uncommon for a majority shareholder to buy out a 20% minority shareholder, particularly if the said company is not listed, like in this case.
Cos if you think about it, the 20% minority has no way to sell out.
No competitor in the industry, is going to buy a 20% stake, when the 80% shareholder is not selling.
The controlling shareholder decides most things too, so the 20% stake if you think about it, is kinda stuck.
Sometimes, the minority shareholder just wants to sell out and have liquidity.
Or the minority shareholder could be promised a bigger role in the enlarged entity after selling out.
I have some personal experience with such a scenario in real life.

[weijian]

hi TTTI,
i dont have an issue with the majority shareholder buying out the minority. It is just with the payment terms (50% above existing market price) that i find interesting.

A few years ago, Yangzijiang shipyard and another consortium actually bought over Baker Tech's 15% stake in PPL shipyard. (Sembmarine owned the other 85% stake) PPL shipyard is in the business of making jackup rigs and its pacific class designs were one of the market leaders. YZJ was looking to scale up the tech curve from ships to rigs. It was a big hoo-haa for Sembmarine as the market wisdom was the Chinese shipyard then had an avenue to gather valuable access to IP and eventually pose a risk to Sembmarine.

So for the case that no competitor in the industry will buy a minority stake in the business, this is generally true but not always, especially if one has a genuine competitive moat and competitors have anything more than a pure profit intent. Sembmarine had to go through law suit to try to make sure the minority stake sale didnt happen.

[TTTI]

Perhaps someone here can help me with something I just can't figure out:

In the recent announcement on the acquisition of the remaining 20% stake in BBR Construction Systems (M):

"Based on the financial statements of BBRM as at 31 December 2016, the book value and net tangible asset value of the Sale Shares is approximately S$3,856,000. The net profit attributable to the Sale Shares amounts to approximately S$1,152,000 for the financial year ended 31 December 2016 (“FY2016”). "

BUT in AR16, Page 75,
the table clearly states that the profit attributable to the NCI of BBRM is $790,000
and the the net assets of the entire BBRM is $18,793,000. Which means the 20% NCI should be $3,758,6000

So to summarize:
20% NCI book value in AR: $3,758,6000, in the acquisition announcement it's "approximately S$3,856,000"
20% NCI profit attributable in AR: $790,000, in the acquisition announcement it's " approximately S$1,152,000"

Perhaps the book value part is close enough to be "approximately"
But the Profit part is quite far away isn't it?

Any pros here can enlighten me? I can't figure this out.

[donmihaihai]

Most likely reason is exchange.

BBRM is a msia company and the financial will be in myr(most likely) despite that it is consolidated in BBR and presented in sgd. The number in the announcement would likely be using current rate. Hence the differences.

Anyway you want the acquisition using current rate than historical rates for all kind of reasons

[TTTI]

Most likely reason is exchange.

BBRM is a msia company and the financial will be in myr(most likely) despite that it is consolidated in BBR and presented in sgd. The number in the announcement would likely be using current rate. Hence the differences.

Anyway you want the acquisition using current rate than historical rates for all kind of reasons

Thank you for your reply.

I thought of that too, but the difference between the NP given in the AR and the announcement, vs the difference between the Book value given in the AR and the announcement, is different too.
If it's exchange rate, the same exchange rate should be applied to the NP and the book value in the AR
and another exchange rate applied to the NP and the book value in the acquisition announcement.

But it's differences don't match up.

[donmihaihai]

Most likely reason is exchange.

BBRM is a msia company and the financial will be in myr(most likely) despite that it is consolidated in BBR and presented in sgd. The number in the announcement would likely be using current rate. Hence the differences.

Anyway you want the acquisition using current rate than historical rates for all kind of reasons

Thank you for your reply.

I thought of that too, but the difference between the NP given in the AR and the announcement, vs the difference between the Book value given in the AR and the announcement, is different too.
If it's exchange rate, the same exchange rate should be applied to the NP and the book value in the AR
and another exchange rate applied to the NP and the book value in the acquisition announcement.

But it's differences don't match up.

Not true if one rate is being used for announcement. rates are used for consolidation in AR. Read notes to accounts on translation in AR

[smallcaps]

http://infopub.sgx.com/FileOpen/Proposed...eID=455335

PROPOSED ACQUISITION OF GOH & GOH BUILDING AT NOS. 110 TO 122
UPPER BUKIT TIMAH ROAD, SINGAPORE

...

The Board of Directors (the “Board” or the “Directors”) of BBR Holdings (S) Ltd (the
“Company” and together with its subsidiaries, the “Group”) wishes to announce that its
subsidiary, Alika Properties Pte. Ltd. (“Alika”) has on 25 May 2017 (the “Contract Date”),
exercised a call option to purchase a property comprising a 4-storey mixed-use development
known as the Goh & Goh Building, located at Nos. 110 to 122 Upper Bukit Timah Road
comprised in Lot 1488P of Mukim 16 (the “Property”)

...

Zoned residential with commercial at the first storey, the Property has a freehold tenure with a land area of approximately 2,868.3 sq m (30,874 sq ft) with a plot ratio of 3.0. Subject to Alika’s payment of a development charge, the site can potentially yield about 100 residential units and a level of retail shops at the ground floor taking into account the permissible Gross Floor Area of 8,604.9 sq m (92,622 sq ft). 

...

 The total cash consideration for the Property is S$101.5 million (the “Purchase Price”) and the Group's share of the Purchase Price will correspond to its 62% shareholding interest in Alika held through BBR Development Pte. Ltd. (“BBRD”), a wholly-owned subsidiary of the Company.

...

[karlmarx]

http://infopub.sgx.com/FileOpen/Proposed...eID=455335

PROPOSED ACQUISITION OF GOH & GOH BUILDING AT NOS. 110 TO 122
UPPER BUKIT TIMAH ROAD, SINGAPORE

...

The purchase costs BBR 62% of $101.5m.

On its balance sheet, BBR has about $60m in cash, $20m loaned to associate, and another $20m loaned to JV.

I think a big dividend from Lakelife EC is unlikely, since this purchase will suck up most of BBR's available cash, and the loans when returned.

Unless a loan is taken.

[karlmarx]

BBR posting losses for Q2, while OKP's profit doubles. General construction more competitive than expressway construction?

http://infopub.sgx.com/FileOpen/Profit%2...eID=465106