Brook Crompton (formerly Lindeteves Jacoberg)

[Contrarian]

> No seller how to buy?

Try put 90cts c- 100cts... book value is 80+ cts...

[Contrarian]

The cost control in the company is excellent.  

Today there is trade done 76 to 79.5cts...  At such levels, valuation is very decent.

Lets hope the higher oil price allow them to sell more motors at higher ASPs.

This undervalued gem delivery another solid quarter result with ~1m profit and 1.2m fcf.
Current market cap only 25.5m, with 14.5m backed by cash, zero debt.
Which works out trailing pe of merely 5.5 and trailing p/fcf of 5.3.

Plus: Very low valuation, Cash cow with very low capex, O&G recovering, potential dividend increase.

minus: no/low growth from current trend, very low trading liquidity.

No seller how to buy?

[ZZF]

halted since friday. wondering whats brewing.
Deeply undervalued imo.
held it for so long.
gladly welcome a not-so-low ball lol.

[psnijders]

There have been some interesting and IMO troubling developments at Brook Crompton in the last few weeks. I hold some shares.

This company has hoarded a lot of cash in the past, as followers of the company will know. The dividend payout to shareholders has been very low for many years, taking into account the excess cash balance in that period.
Another important moment was when the company tried to make an acquisition of a company that was a subsidiary of its major shareholder, the Wolong Group of companies. The valuation of the acquisition target was at a much higher multiple than Brook Crompton itself was trading for in the market. Minority shareholders were critical in their comments to the company about the acquisition. Ultimately, they voted against the acquisition in June 2022: https://links.sgx.com/1.0.0/corporate-an...f235760055. Minority approval was required in that transaction because the seller was associated with the majority shareholder.

Back to today. At the AGM, the minority shareholders voted against the general mandate for interested person transactions (IPT): https://links.sgx.com/1.0.0/corporate-an...a2726c6f4e. This mandate is required for the company to be able to business with companies that are related to its major shareholder. Since the Wolong Group is a major supplier of Brook Crompton, approval of the IPT mandate is, in my opinion, essential in order to operate Brook Crompton's business.

This was obivously a big problem and the company decided to call an EGM and put the IPT mandate to a shareholder vote again. That EGM is set to take place on July 19. The Circular can be found here: https://links.sgx.com/1.0.0/corporate-an...2870d61417

But why would minority shareholders suddenly vote differently? What's the point of the EGM if the disagreements that apparently exist between minority shareholders and company management aren't resolved? Well, it seems like that "problem" might have been solved as well. On July 8, it was disclosed that the ultimate majority shareholder (through its subsidiary ATB Austria) had sold 4.9% of its stake (1.74m shares) to another party: https://links.sgx.com/1.0.0/corporate-an...0363a82ab1. The name of the buyer was not disclosed and since the buyer stayed below the 5% ownership threshold (with its 4.9%), I think it doesn't have to make an ownership filing.

This is very concerning for minority shareholders, because if the 1.74m shares are allowed to be voted at the EGM, it would almost certainly determine the outcome for the IPT mandate vote. I e-mailed SGX about this matter and I saw they asked the company some questions about the transaction. The company's response has been filed on July 12: https://links.sgx.com/1.0.0/corporate-an...286578daa0.

In the filing it came to light that there have been past "business transactions" between the buyer and ATB. And there have also been "business and joint investment transactions" between the buyer and Wolong Electric.

So I think this is a crucial point in time for minority shareholders in this company right now. If the shares are allowed to be voted then it looks quite bad for minority shareholders long term. But I think Singapore Exchange might be able to stand up for minorities here. See Rule 904, paragraph (4a): https://rulebook.sgx.com/rulebook/904

The Exchange may deem any person or entity to be an interested person if the person or entity has entered into, or proposes to enter into: (a) a transaction with an entity at risk; and (b) an agreement or arrangement with an interested person in connection with that transaction.

Since there have been transactions between the buyer and ATB and the Wolong Group, could SGX deem the buyer to be "an interested person" here? In that case the buyer would not be allowed to vote. Do any forum members have insights into this? Any other advice for what minority shareholders can do in this situation I would also like to hear from you.

I think it's very important that shareholders vote their shares against the IPT mandate as long as management is not willing to come to an agreement with minority shareholders. I think a large capital return, or a buyout of minority shareholders at a fair price are talking points that should be discussed. I hope other minority shareholders will stand together and create a good outcome, if given the chance by a favorable intervention from SGX.

[weijian]

I think it's very important that shareholders vote their shares against the IPT mandate as long as management is not willing to come to an agreement with minority shareholders. I think a large capital return, or a buyout of minority shareholders at a fair price are talking points that should be discussed. I hope other minority shareholders will stand together and create a good outcome, if given the chance by a favorable intervention from SGX.

These outcomes are what the minority shareholders desire, but is it that of the controlling shareholder? That is the actual question to be asked. How is the controlling shareholder extracting value from Brook Crompton? Through selling to or through owning Brook Crompton?

In general, odds are deeply stacked against minority shareholders for such situations. You can read this thread here for a past case study (the post dated 05-10-2013, 05:12 PM is probably gold education):
https://www.valuebuddies.com/thread-795.html

I have observed past minorities' success comes either through (1) high local media publicity, and/or (2) existence of large minority shareholder (read Sabana REIT thread for some history). But since Brook Crompton is a ~20mil cap company and the controlling shareholder owns ~13mil of that, giving a "free float" of only 7mil, I am not sure if another large minority shareholder can ever appear.

[weijian]

IPT passed in EGM today (19th July2023)

For 2,260,308
Against: 737,562
https://links.sgx.com/FileOpen/BCHL_Poll...eID=765816

To recap during AGM resolution 6 for IPT (6th April 2023)
For 415,675
Against: 618,712

The difference in FOR votes between April and July is 2,260,308 - 415,675 = 1,844,633. Not insinuating anything but it is remarkedly close to the recent transaction.