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Another way to view this is that Hiap Seng is a contractor, where because of the lumpy nature of the industry - sometimes ROE is high & sometimes its pretty low. The industry landscape is more comfy than competitive: look at the capex on refineries, platforms, and just 3 companies: other 2 being PEC & Rotary share out a pie, in addition, there is a whole host of HSE & track record requirements that are barriers to entry that block many companies from taking their place; Shell is not going to squeeze the contractor margins that much - a refinery explosion is going to be quite nasty for them. So to predict their prospects, one should theoretically look at the customers (i) majors e.g. Shell, CNOOC (ii) EPCs and guess what sort of spending plans they have, or less rigorously - guess what is a 'normalized earnings' and put a 'normalized multiple'.
Sin Ghee Huat is on the other hand exposed to oil & gas and some plant construction. So most (90%) of the steel: plates, bars, etc are sourced directly by contractor or plant owner from steel mills, then the rest of it is for 'emergencies' or things needed on urgent basis. So then you've to look at owners / developers, then main cons, then sub-cons and guess when their inventory is needed and when it was bought or they will buy it, which is hard to estimate with much precision as there're so many steps in a chain. Then the safer way to value them would be to look at their inventories: the #1 driver would be global steel prices, which has little correlation with construction in Singapore & SEA (very small part of the global market).
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Another (2nd so far) buy-back today (21Mar11) - 50 lots (out of the total 105 lots transacted) at $0.245/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
Based on its huge $56.3m cash balance as at 31Dec10.....
http://info.sgx.com/webcoranncatth.nsf/V...400300820/$file/HLH-Ann2Q2011.pdf?openelement
, Hai Leck can afford to buy back a lot of shares, as governed by the 10% limit (equivalent to 32.5m shares) under the existing share buy-back mandate.
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(21-03-2011, 06:33 PM)dydx Wrote: Another (2nd so far) buy-back today (21Mar11) - 50 lots (out of the total 105 lots transacted) at $0.245/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
Based on its huge $56.3m cash balance as at 31Dec10.....
http://info.sgx.com/webcoranncatth.nsf/V...400300820/$file/HLH-Ann2Q2011.pdf?openelement
, Hai Leck can afford to buy back a lot of shares, as governed by the 10% limit (equivalent to 32.5m shares) under the existing share buy-back mandate.
I recall Violetbloom under MTQ subscribed to 16 million shares at 26 cents back in late 2008, and they have been through two rounds of dividends (1c each year), so their effective cost should be around 24 cents. Even though Hai Leck's Income Statement shows a fall in profits, their cash flows are still very healthy and thus they can afford to continue buying back shares.
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Management buy back shares at this point in time, is perhaps trying to support the share price so that warrant holders are more enticed to convert it into Ord. shares, otherwise it is cheaper to buy from open market. Just my guess.
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Buy back another 50,000 shares at 0.245 on 22/03/11.
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Apart from the usual arguments - returning excess capital/cash, raising EPS and/or NAV for the remaining shares, etc. - for buying back its own shares, is Hai Leck also trying to support the share price? It does appear so.
I think the best way for Hai Leck to reward its shareholders is to pay a 'jumbo' dividend around or just after 24Nov11 (the expiry date of the outstanding 129.9m warrants convertible into new Hai Leck shares at $0.26/warrant), so that the share price will shoot up towards its fair/instrinsic value, and those shareholders (including the controlling shareholders) holding warrants could use part or all of the proceeds from the dividend to subcribe/pay for the conversion of their warrants.
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(22-03-2011, 07:01 PM)dydx Wrote: Apart from the usual arguments - returning excess capital/cash, raising EPS and/or NAV for the remaining shares, etc. - for buying back its own shares, is Hai Leck also trying to support the share price? It does appear so.
I think the best way for Hai Leck to reward its shareholders is to pay a 'jumbo' dividend around or just after 24Nov11 (the expiry date of the outstanding 129.9m warrants convertible into new Hai Leck shares at $0.26/warrant), so that the share price will shoot up towards its fair/instrinsic value, and those shareholders (including the controlling shareholders) holding warrants could use part or all of the proceeds from the dividend to subcribe/pay for the conversion of their warrants.
Just curious. Are you positive or negative for this stock at this price?
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(22-03-2011, 09:35 PM)cif5000 Wrote: Are you positive or negative for this stock at this price?
Hai Leck does have a well-established business, providing a range of essential engineering services to the O&G majors. Its management is also proven.
If the company continues to buy back shares at the current price level, then there would be a 'safety net' for public shareholders. Whether the share price would be re-rated upwards towards its justified fair value, I guess it will depend very much on the company's corporate actions.
With the 129.9m outstanding warrants - and its potentially large negative, dilutive impact on EPS and the existing shares - it is unlikely that Mr Market on its own accord would want to cheer up Hai Leck's share price.
If there is a lesson for Hai Leck's management and BOD, they shouldn't have taken someone's advice on having the warrant issue, which has brought no real or incremental benefits to the shareholders.
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25-03-2011, 07:42 AM
(This post was last modified: 25-03-2011, 07:44 AM by freedom.)
if I were the managements and there was no urge to raise cash for the company, I would let the warrants expire. The company has enough cash for general operation. There is no point to exercise the warrants. retail exercise of warrants, which causes dilution to management shareholding, should not their concern. Anyway, the exercise will cost 26 cents, the same as IPO price, just regarding it as a private placement to its own shareholders, why not. as for the loss of 1+ million, it is not bad comparing to more money in the the company's balance sheet for no reason. also, I think the company share-buyback can mitigate the dilution to the management shareholdings.
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25-03-2011, 12:44 PM
(This post was last modified: 25-03-2011, 12:45 PM by tonylim.)
The original warrant holders subscribed to the waraant at 1 cent each.
The Chengs and the Lees are major shareholders, unlikely they will let it expire for nothing, infact some warrant holders has already converted.
Use 27 cents to buy back shares at below 27 cents ,can buy back more than new issues.
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