SHS Holdings (formerly: See Hup Seng Limited)

[cyclone]

Hope it is not diworsification. Will the shareholders approve this time ?

Proposed Diversification of the core businesses of the Group to include the Solar Power Business and Proposed Solar Project

The Group intends to diversify the it's existing core businesses to include the solar power business, which comprises the :
(a) engineering, procurement and construction ("EPC") of solar power systems for third parties;
(b) leasing of solar power systems that the Group owns to third parties;
© EPC of solar power systems for the sale of electric power produced by such solar power systems owned by the Group;
(d) acquisition of solar power systems from third parties for the Group’s operations for the sale of electric power produced by such solar power systems owned by the Group; and
(e) sale of electric power produced by solar power systems owned by the Group.

Last time, the proposed diversification of the core businesses to include the solar power business was shot down at 27 August 2015 EGM.

[pattanispirit]

Letter of Intent already issued by Bangladesh govt.

very soon, official contract will be awarded.

if SHS to turn down when contract is signed, SHS have to pay penalty.

SHS not likely to transfer the contract to other parties.

think mgmt have to act fast b4 getting penalised by Bangladesh govt and ban from future tenders.

[cyclone]

On 26 April 2016, Mr Lim Peng Chuan Terence converts 10,000,000 warrants to 10,000,000 shares for a consideration of S$2,000,000 and becomes a substantial holder.

[Rr_1]

Hello, (I am vested in this stock)

Chanced upon this company last October and it seems to be quite an interesting proposition. The solar energy diversification seems so far, to be quite a wise move. Revenue contribution from the construction of the 4MW SATS project has given a 3.3mil revenue contribution from 2 quarters although the gross margins seem to be lacking at 7-8%. What is interesting though is the mention that "The Group is expected to be able to start selling power by the later part of 1Q17, and this will provide a steady income stream for the Group." There is of course the Bangladesh 50MW project which is slated to be completed on 2QFY18. Barring unforeseen circumstances, one would assume that the contribution from this new segment of revenue will shore up its declining SSF and CP segments. (all the better if oil prices start to recover)

What caught my eye aside from its business though, is its warrants. There is currently, as of its latest financial report, about 218.5mil warrants @ 0.20 still not exercised with expiry at December 2019. This will surely depress share price and limit any rally should there be sufficient reason to expect one. I made some simple calculations (correct me if I'm wrong) and should all its warrants be converted, its NAV will fall from 0.31 to 0.24. But being the ever paranoid value investor, let us assume goodwill turns bad and remove its stated 26.5mil goodwill off its assets. We would arrive at 0.21 if all warrants are converted. With this, it would seem the stock is quite fairly priced. But thinking from another perspective, the conversion of warrants would also mean an influx of cash, about 43mil in this case. As a company that is in growth mode and seeking new revenue streams, I can only perceive that to be a positive. This is assuming management is competent enough to invest in the right places of course. 

Edit: For reference, the company currently has 70mil of cash at a market cap of 143mil@0.21.

All in all, I think this is a stock worth a second look. What do you guys think? (vested)

ray

[BlueKelah]

I always avoid companies that like to issue things like warrants or rights or new stock. They more often than not wind-up diluting minority shareholdings and the end story is often not pretty for opmi.

Well run co should be able to grow from its own earnings and cash pile or finance via banks. Sometimes warrant issue could be a red flag, especially if company has a good cash pile, but still asking for money from shareholders.

Caveat emptor this one..

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[opmi]

I always avoid companies that like to issue things like  warrants or rights or new stock. They more often than not wind-up diluting  minority shareholdings and the end story is often not pretty for opmi.

Well run co should be able to grow from its own earnings and cash pile or finance via  banks. Sometimes warrant issue could be a red flag, especially if company has a good cash pile, but still asking for money from shareholders.

Caveat emptor this one..

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then you wont buy UOB when it was growing...it had a long list of corporate actions...seen somewhere on its annual report before...

Ya. usually no good...

[BlueKelah]

Yup I prefer safe and cheap and friendly to opmi companies ,with lots cash that is really there lol.

Like spindex was when it was 25c. Lol.

The big fundyz can buy all the uob and reits they like and subscribe to all the right warrants and what not... Lol...

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[ghchua]

Hi BlueKelah,

If that is your view, you would have missed out on multi-baggers like Viz Branz, Old Chang Kee etc. Yes, these companies had issued warrants. Even stocks like Jardine C&C, ARA, HMI etc had issued rights shares. Are they bad companies? I don't think so.

Ultimately, you have to examine each rights/warrants issue at its own merits and then decide whether they are good to take up or not. Just by saying all are bad are too simple in my view.

[BlueKelah]

Hi BlueKelah,

If that is your view, you would have missed out on multi-baggers like Viz Branz, Old Chang Kee etc. Yes, these companies had issued warrants. Even stocks like Jardine C&C, ARA, HMI etc had issued rights shares. Are they bad companies? I don't think so.

Ultimately, you have to examine each rights/warrants issue at its own merits and then decide whether they are good to take up or not. Just by saying all are bad are too simple in my view.

Yup I also miss out on a lot of warrant issuers that crashed and burned . Not interested in multibaggers, more interested in buying for 50c on the dollar and getting a double bagger without having to lose sleep and getting paid whilst I wait.... Lol

Since that's my strategy and it's pretty profitable, no point waste my time and effort looking at 'growth' companies.

Higher risk will of course get higher return [emoji1] but that's not my game.

Just like avoiding schips wholesale, so what if there are some good ones that can be multibaggers, so what if I miss them, plenty of other good local profitable co. to invest, just have to know how to find.

Dun wanna be caught when the tide goes out lol..

YMMV and if you've picked this stock then wish u the best. Could be another viz or ock or osim, who knows.

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[Rr_1]

From the company's website (announcements that go back to 2008) there was another bonus warrant issue in 2009 which expired at 2012 with an exercise price of 0.23. Not all warrants was converted. Subsequently, in late 2013, SHS acquired Hetat holdings with capital raised through share placements (144mil shares). Ng Han Kok, the founder of Hetat is now the CEO of SHS. The current warrant that is listed now was issued at 2014 and has an expiry at 2019 exercise price @0.20. So far, it does not seem that SHS has gone into the habit of issuing warrants to the extent of certain oil companies. Capital raised from the issue of shares or warrants seem to actually be used for the right purposes. As to the huge cash pile of 70mil, SHS disposed of TAT petroleum at end 2015. A special dividend of 3.68cents and 0.32cents were announced, thereby eliciting warrant holders to convert into shares. We can observe that share price dropped from 0.28 levels to around 0.22 during this time. My best guess is that the ex date of the special dividend and conversion of shares served to put pressure onto the stock. The subsequent fall to below 0.200 is a mystery to me though, perhaps the result of the downturn in the oil industry. For transparency reasons, the <0.200 is also where I built my position.

This is certainly not a pure value play; there are elements of risk that don't belong to the usual Graham-Dodd style. Personally, I like a little "flaw" in the companies I research. If the issues are clear and are being addressed, it provides catalyst for the stock to rally if and when the issue has been resolved. One example is Fu Yu, where declining revenue and profitability turned investors away. Ever since the amazing cost cutting measures which has been on-going for years now, profitability (helped by rising USD) and FCF has soared. Of course, Fu Yu and SHS are totally different companies and shouldn't be compared directly (just making an example). If anybody has researched or has experience with SHS before, perhaps he/she can provide us with more information on this thread.