G. K. Goh Holdings

[pianist]

Bloomberg news earlier on speculating 300m usd, turned out to 287m instead, not too bad
Waiting to receive the payout cheque from temasek for my unlisted boardroom shares, huat ah
Glad that I didn't accepted the 88cents general offer from gkgoh few years ago

We have 1 fine example of an OPMI with the temperament of the Big Boys!

IIRC, GK Goh already owned a large portion of Boardroom in the last GO and hence it wasn't able to gather the 90% (of outstanding shares it didn't own through the current owner) to do a compulsory accquisition.

Would you be able to share the entire process of been an OPMI in an unlisted company? (ie. the practical differences between Company Act and listing rules)

(1) What was the struggle behind the thought process to remain as an OPMI? What was the decider that made you decide to go "hell or high water" with the Gohs?

(2) Was there any difficulties about not getting any information while staying unlisted? eg. corporate actions about Boardroom (granted that it should be easier since GK Goh itself is listed and has to report corporate actions of its subsidiary)

(3) What about financial statements, dividends, AGMs and voting etc?

Main factor is I'm relatively younger than the gohs, so holding power should outlast them, so they will show hand their card sooner, 
The rest are simple, just collect the annual dividends at nice rate equal to that before unlisted, via a cheque.
Agm? Not aware as been busy with work, so it turn out fine for passive small fry investors like me
Read the shortened streamlined annual financial statements and compare against gkgoh data, for consistency

Previously also held on to unlisted auric Pacific but alas its shortlived as the minority shareholders chickened shortly after the company tried to fish them out through a internal corporate action

So the key takeaway is eveno if u want to hold to unlisted shares of a Go, the big fish will eventually still want u out of their game, net net just try hold on dun be afraid of that 90% threshold in a go exercise if u believe in fa

[weijian]

Hi pianist,

Thanks for the sharing. I think as along as the Offeror has multiple assets, there is always a high chance that post delisting down the road, the Offeror will be doing some sort of recycling (to their advantage of course). Examples like the Riadys/Gohs which have multiple assets, contrast to CK Tang whom were delisting their "heirloom asset".

There is of course a huge difference between Indonesia Godfathers like Riady and local Towkays like Goh I suppose. The latter, GK Goh been a director of Temasek Foundation, probably has much more to lose in reputation than money I suppose. Of course, GK Goh has always been consistent in sharing some of the rewards with OPMI through out the years as well.

Temasek Foundation BOD: https://www.temasekfoundation.org.sg/abo...leadership

Studying these examples over the years, actually present a very clear path how to navigate such "general offers --> going unlisted --> eventual exit" for the OPMI!

[ghchua]

Hi weijian,

I think you have to take into consideration a lot of stuff that one could not control after a stock had been delisted.

The most obvious one is lack of information and corporate governance. Unlisted public companies don't make announcements frequently, and I often dunno what is going on. Another is lack of communication. They only give me a set of audited accounts every year. No chairman statement. No outlook statement. No financial review.

Finally, it is difficult to do portfolio allocation with a unlisted company. I cannot add more (if I like the stock) or sell in parts. Basically, just holding and hope for eventual exit (which might take years as the other parts of your portfolio had grown).

Therefore, if there is a listed holding company as in this case, the most logical thing to do is to accept the Boardroom offer and then re-invest into GK Goh. After that, you can make your investment decisions on GK Goh by buying more when it is cheap, which you could not do it with unlisted Boardroom.

[weijian]

hi ghchua,
If I had made a sweeping statement earlier, I apologize because it wasn't the intent. Investing is always probabilistic.

In this particular case, I am breaking down the entire decision process into parts and only considering the part that gauges the "suitability of going unlisted with the Offeror" - what are the safeguards and what is the probable behavior of the Offeror?

You have made great points with wrt to asset allocation, liquidity needs and a potential replacement in terms of buying GK Goh instead (although I have to argue this last point as I feel it is still better to buy the "child", rather than the parent as the child always has to pay upwards to benefit the parent first).

I always marvel at Buffett's claim of having the serenity of buying something and then locking up the share cert for XX years without ever looking at it. I reckon that is the ultimate litmus test for us to buy a stock?

[ghchua]

hi ghchua,
If I had made a sweeping statement earlier, I apologize because it wasn't the intent. Investing is always probabilistic.

No apologies needed as we only know the outcome in time to come and when we make decisions, it is always based on information at that point in time.

You have made great points with wrt to asset allocation, liquidity needs and a potential replacement in terms of buying GK Goh instead (although I have to argue this last point as I feel it is still better to buy the "child", rather than the parent as the child always has to pay upwards to benefit the parent first).

I always marvel at Buffett's claim of having the serenity of buying something and then locking up the share cert for XX years without ever looking at it. I reckon that is the ultimate litmus test for us to buy a stock?

The decision would have been easy if after the GO, the offeror intention is to keep Boardroom listed. I would have kept the "child" in my portfolio just as the previous GO attempt by GK Goh in 2014 for Boardroom when they bought a block of shares from Third Avenue Asset Management. I did not accept the offer back then in 2014. But they decided to delist the company in 2019, and therefore it complicate my decision making process.

I dunno about Buffett, but if he is holding a substantial stake in companies, obviously he has a say of how the company is being run. We are just minorities, and our bargaining chips are even lesser when a company is unlisted.

[weijian]

Offer is 0.97x NAV and 38.5% above last traded price. Rare for an offer to be close to NAV (for companies that practises fair value accounting). I guess maintaining reputation is worth the money to be spent.

VOLUNTARY CONDITIONAL CASH OFFER FOR G. K. GOH HOLDINGS LIMITED AT S$1.26 PER SHARE

The Offer Price for each Share is S$1.26 in cash, and values the Company at approximately S$396.0 million.

The delisting and privatisation of the Company, if achieved as a consequence of the Offer, will allow us to restructure the Company’s asset mix. This will be a long process. Many of the Company’s existing investments are in private equity and venture capital funds which will take time to mature, and which cannot easily be sold or redeemed. We also view the Company’s aged care businesses and assets in Australia and Singapore as long-term in nature, requiring patience and determination to build value. An unlisted, private Company would have greater flexibility to take strategic long-term decisions without as much pressure to deliver profits in the short term, or to incur costs relating to the Company’s obligations as a listed Company.

PR: https://links.sgx.com/FileOpen/Press_Rel...eID=748139
Annoucement: https://links.sgx.com/FileOpen/Offer_Ann...eID=748138

[ghchua]

Hi weijian,

Indeed. It is a decent offer. Having sold Boardroom, they have lost their most cash generative business in their portfolio. Aged care businesses are long term in nature, with the Singapore side still yet to be profitable and Opal having new challenges, it will take time for both of them to be up to speed. Meanwhile, they are more into private investments rather than listed companies, which means their liquidity are tied. Having said that, if they have decided to continue to remain listed, they would still be able to pay out their usual 2cts dividend per year to shareholders, due to the dividend payout from their associates and investments. Plus, they are now in decent net cash position, after paying down borrowings from their sale in Boardroom and holding back some cash from the sale. Having said that, I don't think the market will be excited with a flat 2cts or 3cts dividend per year, especially considering the yield from other stocks listed on SGX.

Maybe they have some plans to restructure the business into something that is more suitable to be private than public. It had been an eventful journey with them, and I wish them well in future. Thank you, GK Goh.

[D123]

Hi weijian,

Indeed. It is a decent offer. Having sold Boardroom, they have lost their most cash generative business in their portfolio. Aged care businesses are long term in nature, with the Singapore side still yet to be profitable and Opal having new challenges, it will take time for both of them to be up to speed. Meanwhile, they are more into private investments rather than listed companies, which means their liquidity are tied. Having said that, if they have decided to continue to remain listed, they would still be able to pay out their usual 2cts dividend per year to shareholders, due to the dividend payout from their associates and investments. Plus, they are now in decent net cash position, after paying down borrowings from their sale in Boardroom and holding back some cash from the sale. Having said that, I don't think the market will be excited with a flat 2cts or 3cts dividend per year, especially considering the yield from other stocks listed on SGX.

Maybe they have some plans to restructure the business into something that is more suitable to be private than public. It had been an eventful journey with them, and I wish them well in future. Thank you, GK Goh.

I echo the sentiments here. IMHO the offer is fair and I think the Gohs' conduct here is worthy of applause. I hope they succeed with their aged care ventures.

[ryan]

Indeed GK Goh has been very ultra shareholder-friendly and declared special dividends with every major asset sales. 

One of the major assets left to unlock is their 48% associate share of Opal Healthcare in Australia. The star ratings of their care community complex are comparable with their ASX-listing peers (Estia Health and Regis Healthcare) - 2% 2-star, 59% 3-star, 39% 4-star. More details of star ratings for residential aged care : https://www.health.gov.au/our-work/star-...-aged-care.

Opal: >9000 beds (valuation??)
Regis: >7000 beds (market cap as of 1 Mar 2023: A$468mil)
Estia: >6700 beds (market cap as of 1 Mar 2023: A$530mil)

[ghchua]

Opal: >9000 beds (valuation??)
Regis: >7000 beds (market cap as of 1 Mar 2023: A$468mil)
Estia: >6700 beds (market cap as of 1 Mar 2023: A$530mil)

Hi ryan,

I guess we have to wait for the IFA report before commenting further. I don't know whether the IFA will call for a valuation on Opal, or just take GK Goh's carrying value on its balance sheet.

Also, I don't think GK Goh will sell Opal in the near future even if it is delisted, since they said that they are in for it for the long term.