Friday, January 31, 2014

First purchase in 2 years - Boardroom Limited

The recent market volatility made me salivate and perked my interest in the equity market again. I have been extremely uncomfortable with my asset allocation but even more uncomfortable with the relentless surge of the equity markets. These 2 years have indeed been a lesson of patience for me. So it was with extreme joy when the Fed decided to cut back a further $10 billion dollars of money printing.

It has been a period of elation for me too when emerging currencies plummeted while the Sing dollar held strong. But, things are still too expensive. 

Boardroom offers mainly :
  1. Corporate Secretarial Services, 
  2. Shareholder Services  
  3. Accounting and payroll services. 
Based on it IPO prospectus in year 2000, it has acted as a share registrar or share transfer agent for approximately 43.6% of listed companies in SGX . For corporate secretarial services, it has a market share of 19% of listed companies in SGX, in addition to private limited companies. As of Annual report 2013, share services captured about 63% of Singapore IPOs, or 86% of total IPO market capitalisation. Examples include, Asian Pay TV Trust, Croesus Retail Trust,Mapletree Greater China Commercial Trust,Far East Hospitality Trust, Ascendas Hospitality Business Trust and  IHH Healthcare Berhad. In Australia, about 30% of successful listings were completed by Boardroom.

With many acquisitions since their IPO in 2000 ($0.39), their footprint is now in China, Malaysia, Australia, Hong Kong and Singapore.

GKGoh (through Salacca) made a mandatory conditional(SGX rule 14)  cash offer of $0.575 for Boardroom after their percentage increased from about 33% to about 44% in January 2014. ( married deal with Third Ave).
In the past (in 2006), GKGoh had also made a mandatory conditional  cash offer of $0.50 for Boardroom.
In the 2008-2009 Financial Crisis, Boardroom dropped to the lowest closing price of $0.42.
It has a dividend yield of 5.17 percent with a ex-div of $0.01 every year in Feb(coming soon) and $0.02 every year in late Oct. Dividends has been consistent at $0.03 every year and i believe this is sustainable based on it's consistent free cash flow generation every year, which after netting off repayment of loans, is still enough for paying out the dividends.


A further confirmation of the sustainability of the dividends is given in a statement in the Offer Document that the purchase was for a stable, recurring income for GKGoh.


Now, is there any possibility of GKGoh being able to take Boardroom private ( happens only when it attained more than 90% of Boardroom) ? I do not think so. In fact, i am pretty confident that GKGoh will not even be able to attain 50% of Boardroom through acceptances ( 50% is needed to make the offer binding) as it would be quite silly for investors to sell it at $0.575 given that the lowest price it dropped to was only $0.42 in 2008-2009 and it current dividend yield is pretty decent. It is further confirmed by the offeror that the intention is to maintain the listing.


To me, Boardroom is a "under the radar" kind of  company with a limited dearth of information from both research analyst, bloggers or forumners ( Try Googling it). It is a cow to be milked for its dividends and it offers a limited downside ( hovering about $0.575 due to GKGoh offer price serving as a anchor point), with the worst case scenario of $0.42 ( Financial Crisis). In terms of upside, it has reached a high of $0.70  in march 2013 and given the historical performance of both the share price and the company fundamentals, it is quite safe to say that in the long run, capital appreciation is highly possible( barring any corporate mischief of course). Its current other significant shareholder now is Nanyang Press (Singapore) Limited with about 12% ownership. ( Nanyang Press owns about 0.5% of SPH. It seems that they invest in dividend paying companies.)As important to me is that this company does not print shares( akin to printing money through rights, thereby devaluing the value of something) and the shares outstanding is pretty stable ( yes, there is still employee options and scrip dividend but thank GOD no rights issuance). Of cos i am vested.
Update: Salacca shareholding has reached 81.28% . I was wrong. I have exited and learnt a valuable lesson.
Exercise caution in dealing with highly illiquid counters. I believe that this Offer by Salacca was done to allow existing substantial shareholders or management who have considerable holdings to encash their shares without affecting the share price since its highly illiquid. Another reason for my exit was because i didn't want the risk of holding a delisted counter in case the public float became less than 10%. Life sucks but lesson learnt is priceless.

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