Proposed Voluntary Delisting of Rotary Engineering Limited ("REL")
Highlights :
1. OROCHEM proposes to delist Rotary Engineering Limited from the Official List of the SGX-ST and make a cash Exit Offer to acquire all REL Shares
2. Exit Offer of S$0.460 in cash per Share
3. OROCHEM does not intend to revise the Exit Offer Price
4. Undertaking Shareholders collectively owning 60.63% of REL have given their irrevocable undertakings to vote all their Shares in favour of the Delisting Resolution and accept the Exit Offer.
03-10-2017, 11:48 AM (This post was last modified: 04-10-2017, 08:40 AM by weiyitan84.)
the offer price is disappointing. Should minority shareholders accept the offer? Depends on your time frame, if you are looking for a quick exit yes, otherwise I would suggest to reject the offer. The Chia family and Oman Investment Fund's offer is unattractive for the following reasons: 1) We are just seeing the start of the energy sector showing signs of recovery. Evidently shown by Rotary's growing order book size of S$463.2 million as at 8 Aug 2017 2) In the OPEC member countries are expected to spend ~US$66.5 billion on downstream O&G assets (See file attached from OPEC) and Rotary is well positioned to bid for these new asset construction work being based in the Middle East + Oman govt's support --> we can expect the order book to grow - In terms of Gas reserves (As per BP Statistical Review of Global Energy 2011) a) Qatar is ranked 5th largest globally b) Saudi Arabia ranked 8th c) UAE ranked 17th d) Oman ranked 27th i.e. there is a lot of gas storage work to be done in this region where Rotary is well placed to bid for 3) Oman Investment Fund bought 21% stake in Rotary @ ave price S$0.89 per share. Compared to the current offer of S$0.46. That is a far cry from what they bought it at. Should give some indication to what this Company is really worth. 4) Looking at the technical charts, Rotary Engineering is all set up to increase exponentially (Long base set up with very little overhang selling pressure looks like a Stage 1 set up going into Stage 2), why limit your gains to the low price of S$0.46? According to the Offer document we only need ~22.341 million (10% of remaining shares not owned by Chia family and Oman Investment) shares to reject the offer proposal. this works out to about ~S$10 million worth of shares which I think can be easily met. Why give up the majority of the price gains to Chia family and Oman Investment Fund? If you are a minority shareholder, you can reject the offer and if the offerer gets the minimum level to compulsorily acquire the remaining shares, you also get bought out at S$0.46 And if you reject the offer and offeror does not get the minimum level to acquire the remaining shares, in the short term, the share price will decrease, but in the long run your share return will exceed the measly offer price of S$0.46 (Assuming points 1 to 4 raised above are valid) For me I will choose to reject the offer and bet on the chance for a share price much higher than S$0.46
fair points wei, if you are not in a hurry to exit, there's no need to sell at this low-ball offer?
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR!
4) In BULL, SELL-SELL-SELL!
1) EGM to approve delisting of the Company
- As long as at least 10% of the shareholders vote against the delisting resolution, the Company will not be able go ahead with the delisting of the Company. The 10% threshold applies to the entire outstanding shares of the Company (Excluding treasury shares)
Shareholders will be notified by post on the EGM location and date. In the letter to shareholders, there will be a form to appoint a proxy to represent them at the EGM and on the form there will be a option to vote for / against the delisting resolution.
You can either attend the EGM or appoint a proxy to attend on your behalf. If you dont have a proxy you can fill in the names of any of the directors to represent you at the EGM and as long as you select the vote for / against option, the proxy will vote according to your selection.
So if you are not attending the EGM, it is absolutely necessary to fill up the proxy form with your vote against the delisting resolution and mail the form back to the share registrar before indicated date so your vote will be counted
2) Acceptance of the Offer
The offer is conditional upon whether the delisting resolution goes through or not. i.e. if delisting resolution not approved, the offer will lapse
In this part, the key is whether the offer acceptances exceeds 90% of the shares not owned by Chia and Oman Investment
Lets run through the scenarios:
A) Delisting offer resolution is approved
If the acceptances of the offer exceeds 90% threshold, the remaining shares will be compulsorily acquired regardless of whether the remaining 10% accept or reject the offer
If acceptances of the offer does not exceed 90% threshold, the remaining shares cannot be compulsorily acquired. But the Company will still be delisted since the delisting resolution was approved
The key is to block this right at the EGM phase of the delisting resolution. Because if the delisting resolution at the EGM is approved, regardless of the acceptance level of the offer, the company will be delisted
Wait for the notification of EGM to be mailed to you. Should be in your letterbox by this week. Inside the document pack there will be a proxy form for you to appoint your proxy and indicate your vote for/against the delisting resolution.
You can either attend the EGM or appoint a proxy to attend on your behalf. If you dont have a proxy you can fill in the Chairman of the meeting/board to represent you at the EGM and as long as you select the vote for / against option, the proxy will vote according to your selection.
So if you are not attending the EGM, it is absolutely necessary to fill up the proxy form with your vote against the delisting resolution and mail the form back to the share registrar before indicated date so your vote will be counted
2) Free-cash-flow is positive 6 out of 10 years. It can be observed that they are directly correlated to the global economy and/or oil industry. Over the 10 year period, total FCF is $165.8m, or $16.5m a year.
3) Net Profit has been positive in 9 out of 10 years, but about twice as high as FCF. Over the 10 year period, total net profit is $294.7m, or $29.4m a year.
4) Rotary also has a strong balance sheet, with about $60m of cash that could be distributed if it has no plans for more capex.
If we value Rotary's business at 10x of its 10-year-average FCF, we will get $165.8m. If we use 8x of its 10-year-average Net Profit, we will get $235.2m. Add this to the $60m cash which can be distributed, we get either $225.8m (valuation using FCF) or $295.2m (valuation using NP). Currently, Rotary is trading at a market cap of $255m, which is in-between the two very rudimentary calculations presented here.
Investors may feel that the oil market is recovering, and that Rotary may be looking at more prosperous years ahead, hence the low offer price. The flip side is that nobody can be really sure of the future. Perhaps the management of Rotary has received increased quantity and quality of inquiry. But 5 years from now, who can be really sure. I don't think they are infallible.
I think shareholders are not getting a bad deal, but many may have bought Rotary at a too high price.
Even if making any money from any delisting, retailing investors should try their best to get more.
Just like it's only natural for the offer price to be as low as possible.
Always try to be among the lasts to throw in the tower.
Vested:- some units may be from IPO time.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
Personally I feel that Rotary has very good potential as a valuable company and am impressed on how far it has come since it started. Kudos to the founders. They have worked hard and in my opinion have steered the company well even in the midst of the energy downturn.
Its just disappointing that before the value of the company can be realised, we are facing the delisting of the company. Hoping that we can get a fairer value for our shares.
So what is a fair value? All depends on your perspective.
As a buyer I would also want to buy low, and as a seller i want to sell high.
My strategy now is to do the following:
1) Submit my vote for the EGM on the delisting resolution
2) Wait for the result of the delisting resolution:
a) If delisting resolution is rejected, Rotary remains listed and offer lapses, so no action required to accept or reject offer
b) If delisting resolution is accepted, then I would accept the offer @ S$0.46 cents. As regardless of the acceptance level of the offer, the company will still be delisted. And I dont want to hold shares in a private company where I dont know when I can exit my investment
(03-10-2017, 08:50 PM)Hi Karl,Appreciate your thoughts :) Wrote: Always good to consider different perspectives. Agree with your analysis below on the fairness of the offer.
Do note that the past 10 year earnings data happened in the context of a 10 year energy downturn so naturally, the figures will be subdued.
Assuming that the future earnings of the company is accurately reflected by the historical earnings then yes I would agree that the offer is fair.
So the divergence in views here is regarding the future earnings of the company.
True that no one can predict the future. But it doesnt stop us from taking a perspective of what we think the future might look like for the energy sector.
Please see below for a few of my rudimentary thoughts on why I take the perspective that the energy industry starting to look up:
1) For the past 10 years the energy sector has cut down on investment in new E&P activities and focused on existing projects and low cost E&P activities. There is a certain lifecycle for the wells and I think that from the supply side, we will soon experience supply shortages due to minimal investments over the past 10 years. This will drive energy prices up and translate to more projects for service providers like Rotary
2) In the OPEC member countries are expected to spend ~US$66.5 billion on downstream O&G assets (See file attached from OPEC) and Rotary is well positioned to bid for these new asset construction work being based in the Middle East + Oman govt's support --> we can expect the order book to grow
- In terms of Gas reserves (As per BP Statistical Review of Global Energy 2011)
a) Qatar is ranked 5th largest globally
b) Saudi Arabia ranked 8th
c) UAE ranked 17th
d) Oman ranked 27th
i.e. there is a lot of gas storage work to be done in this region where Rotary is well placed to bid for
So assuming that there will be an upturn in the energy industry and Rotary stands to increase its revenues and earnings from this upturn in the industry then I take the view that the current offer price does not accurate reflect this potential
karlmarxNot to be a wet blanket, but to me at least, the offer appears to value Rotary Engineering fairly.
1) Revenue (in SGD), and order book, has been trending lower since the oil price crash. Can it recover? Reversion to mean? Maybe...
2) Free-cash-flow is positive 6 out of 10 years. It can be observed that they are directly correlated to the global economy and/or oil industry. Over the 10 year period, total FCF is $165.8m, or $16.5m a year.
3) Net Profit has been positive in 9 out of 10 years, but about twice as high as FCF. Over the 10 year period, total net profit is $294.7m, or $29.4m a year.
4) Rotary also has a strong balance sheet, with about $60m of cash that could be distributed if it has no plans for more capex.
If we value Rotary's business at 10x of its 10-year-average FCF, we will get $165.8m. If we use 8x of its 10-year-average Net Profit, we will get $235.2m. Add this to the $60m cash which can be distributed, we get either $225.8m (valuation using FCF) or $295.2m (valuation using NP). Currently, Rotary is trading at a market cap of $255m, which is in-between the two very rudimentary calculations presented here.
Investors may feel that the oil market is recovering, and that Rotary may be looking at more prosperous years ahead, hence the low offer price. The flip side is that nobody can be really sure of the future. Perhaps the management of Rotary has received increased quantity and quality of inquiry. But 5 years from now, who can be really sure. I don't think they are infallible.
I think shareholders are not getting a bad deal, but many may have bought Rotary at a too high price.
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