Avarga (formerly: UPP Holdings)

[weijian]

Selling something in Myanmar at 30% above NAV to a unrelated company incorporated in May2024. Sounds about too good to be true but it is true that the Purchaser has paid a booking fee.

Let's see how the O&M termination with the local partner (operating and maintaining the power plant) pans out and all the terms/conditions attached to the agreement, pans out in due time.

PROPOSED DISPOSAL OF THE COMPANY’S ENTIRE SHAREHOLDING INTEREST IN UPP GREENTECH PTE. LTD.

Based on the latest audited consolidated financial statements of the Group for FY2023, the book value and net tangible asset value of the Target Companies is approximately S$10.5 million.

The net proceeds from the Proposed Disposal (assuming that no Monetary Compensation is payable and there is no set off against the Deposit) are expected to amount to approximately S$13.5 million and is intended to be utilised for settlement of the power plant’s potential O&M expenses or claims (if any), repayment of bank borrowings and/or working capital requirements.

https://links.sgx.com/FileOpen/Announcem...eID=807212

[mslee888]

Another fair but unreasonable offer on the table?

https://links.sgx.com/FileOpen/Annc_Unco...eID=824784

[weijian]

Another fair but unreasonable offer on the table?

https://links.sgx.com/FileOpen/Annc_Unco...eID=824784

hi mslee888,

It seems like this is a mandatory offer triggered because one Msian tycoon decide to buy another Sporean tycoon's share. God knows what's going between both of them

Anyways, Chairman Ooi has an intention to restore the free float, if it was ever lost. It does fit into their theme with Avarga as a holding company of businesses and they have nothing to lose. Their million-dollar salaries will continue to flow from Taiga.

Avarga receives S$0.25 per share offer from its executive chairman

PAPER manufacturing and building materials distributor Avarga : U09 +4.26% has received an unconditional mandatory general cash offer of S$0.25 per share, it announced in a bourse filing on Monday (Nov 11).

The offeror does not intend to preserve the listing status of Avarga following the completion of the offer, and will exercise its rights of compulsory acquisition

However, if TKO is unable to acquire all the shares or seek a voluntary delisting with the total issued shares held by the public under 10 per cent, it will undertake actions to lift any trading suspensions.

https://www.businesstimes.com.sg/compani...e-chairman

[weijian]

With the Myanmar gas power plant sold and now the cessation of UPP Paper, Avarga will be left with only 1 business (which is also its main business). So come 2025, it will be effectively a company holding just one asset - pretty redundant.

Will Chairman Tong try to declare more cash upwards from Taiga so that it may be able to purchase/hold more assets at Avarga level? If not, after all provisions related to UPP/Myanmar powerplant are settled, it is probably a matter of time before Chairman Tong declares Taiga shares to be distributed as dividend-in-specie and and offer cash for OPMIs who don't want shares listed on the Toronto Exchange.

CESSATION OF PAPER BUSINESS

For the six month period ended 30 June 2024, the paper mill division contributed to 2% of the Group’s revenue (from continuing operations after the disposal of the Group’s power plant) and 5% of the Group’s assets (from continuing operations after the disposal of the Group’s power plant), and it recorded a pretax loss of S$1.4 million compared to the Group’s pre-tax profit of S$31.8 million.

https://links.sgx.com/FileOpen/Annc_Cess...eID=826866

[weijian]

Another fair but unreasonable offer on the table?
https://links.sgx.com/FileOpen/Annc_Unco...eID=824784

hi mslee888,
It seems like this is a mandatory offer triggered because one Msian tycoon decide to buy another Sporean tycoon's share. God knows what's going between both of them
Anyways, Chairman Ooi has an intention to restore the free float, if it was ever lost. It does fit into their theme with Avarga as a holding company of businesses and they have nothing to lose. Their million-dollar salaries will continue to flow from Taiga.

No problem since Chairman Ooi probably never intend to privatize it in the first place.

APPENDIX I – LETTER FROM THE IFA TO THE INDEPENDENT DIRECTORS IN RESPECT OF THE OFFER

Based on our analysis and after having considered carefully the information available to us as at the Latest Practicable Date, we are of the opinion that, as of the date hereof, the terms of the Offer, on balance, are not fair and not reasonable. Accordingly, we advise the Independent Directors to recommend Shareholders to REJECT the Offer.

IFA: https://links.sgx.com/FileOpen/3_Avarga_...eID=827853

[weijian]

Have extracted a few paragraphs from the IFA's opinion that talks about the NAV, RNAV and sum of realizable parts (sounds like liquidation value to me) in italics below:

Based on the total number of 908,313,642 Shares (excluding 41,831,700 Shares held in treasury) as at the Latest Practicable Date and the unaudited NAV attributable to Shareholders of approximately S$356.6 million as at 30 June 2024, the NAV per Share as at 30 June 2024 was approximately S$0.3926. The Offer Price of S$0.25 represents a discount of approximately S$0.1426 or approximately 36.32% to the unaudited NAV per Share of S$0.3926 as at 30 June 2024, or a price-to-NAV (“P/NAV”) ratio of approximately 0.6 times

The unaudited RNAV attributable to Shareholders of approximately S$389.9 million as at 30 June 2024, the RNAV per Share as at 30 June 2024 was approximately S$0.4293, or a price-to-RNAV (“P/RNAV”) ratio of approximately 0.6 times.

We have also applied (i) total corporate income tax rate (comprising federal and provincial corporate income tax rate) of 27% on the potential capital gain that may be recorded by Avarga Canada Limited on the sale of all the Taiga Shares held by Avarga Canada; (ii) that 66.7% of the capital gain on sale of Taiga Shares will be taxable; (iii) that Avarga Canada Limited will have capital gain of CAD198 million if it is able to sell its Taiga Shares at the closing price of CAD3.79 on the Latest Practicable Date; (iv) the closing exchange rate of S$1.00 to CAD1.0542 as at the Latest Practicable Date as extracted from Bloomberg Finance L.P.; and (v) a 15% withholding tax imposed by the Canadian government on the amount paid by a Canadian company to its overseas shareholders. the estimated range of values for each Share is between S$0.256 and S$0.276.

So Avarga's market price is trading at ~0.6-0.65x of RNAV/NAV. But from liquidation value perspective, it looks quite matched. Accordingly to Xandar Capital the IFA, the offer is not fair and not reasonable. But in reality, is Avarga's current market value really undervaluing it?

[mslee888]

Valid acceptances of the Offer as at 6.00 p.m. (Singapore time) on 16 December 2024 received from: Shareholders (other than the Offeror Concert Parties) 149,939,352 shares- 16.51%, pushing acceptance levels close to 70%. Seems like quite a few existing shareholders are losing patience over this stock.

[ksir]

I'm one of them, accepted 50% to reallocate to HLS which imo far more undervalued than Avarga with better topline visibility.
Why 50% and not 100%? I love to keep a good biz man (Mr TKO) as partner and also still like Taiga biz (most of my Avarga stakes is reallocated from selling my Taiga shares).

[ghchua]

SIAS advise shareholders to reject the offer.

Press Statement on Unconditional Mandatory General Offer for Avarga Limited
https://sias.org.sg/latest-updates/press...a-limited/

[weijian]

SIAS advise shareholders to reject the offer.

Press Statement on Unconditional Mandatory General Offer for Avarga Limited
https://sias.org.sg/latest-updates/press...a-limited/

hi ghchua,

Thanks for posting the article as only through it, I realized that I had earlier missed the official response, that is the ID's recommendation to shareholders. Not that it matters I suppose. Anyone with enough decency, will never comment that the hand that feeds you, is unreasonable.

IFA = unfair and unreasonable, recommend reject.
ID = unfair but reasonable, recommend accept.

I suspect the truth is probably somewhere in between. VBs have more than enough independence to make their own minds, according to their own circumstance and style.