- Breaking up two founding holding companies and distributing shares downwards.
- Voluntary lock-up till Aug 2015. Mechanism to limit subsequent sale of shares to preserve enterprise value.
- Maintain BUY & DCF TP of SGD3.18.
Sarine has announced the break-up of the shareholding structures of Sarin R&D (28.7% stake) and Interhightech (12.7%), as we anticipated in our 27 Mar 2014 report. Sarin R&D comprises seven manufacturing and trading holding companies and Interhightech, four personal-holding companies. Following their dissolution, their shares will be distributed down to the next holding levels.
What’s Our View
Following the above restructuring, only two founding entities, Hargem Ltd and Stark Hanoh Holdings, both originally under Sarin R&D, will appear as substantial shareholders, with about 7.0% and 7.3% stakes respectively. Executive Chairman, Mr Daniel Glinert, and CEO, Mr Uzi Levami, both originally under Interhightech, will hold about 3.5% each. The shareholders have agreed to a lock-up period till Aug 2015. Sarine will implement a mechanism to limit the sale of these shares after the lock-up.
While some investors may fret that the above move was made to facilitate the exit of its founding shareholders, we believe it had been well-flagged and will not affect Sarine’s share price. It should allow the founding shareholders to monetise their investments for retirement and wealth distribution. Many of them are getting on in years and are no longer involved in the business. The restructuring is also unlikely to have any adverse impact on the business. On a more positive note, it could improve the stock’s trading liquidity. Maintain BUY and DCF-based TP of SGD3.18 (WACC 9.6%, terminal
growth 2%).
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