PNE Industries sells down stake in PNE PCB Bhd

A quick update on another positive development at PNE Industries. On June 6 the company called an Extraordinary General Meeting to ask shareholders approval for the disposal of the company’s 42.8% shareholding in PNE PCB Bhd: link. This resolution was passed by shareholders on June 25.

PNE Industries announced today that is has sold 5.0 million shares of PNE PCB for 1.10 Malaysian Ringgit per share. The aggregate consideration of RM5.5m is equivalent to S$2.14m. The company still owns 23.1 million PNE PCB shares after this sale. If PNE Industries can receive the same price for these shares, that would mean proceeds of another S$9.9m SGD. If they can only get 0.90 per share: S$8.1m. Given PNE Industries’ current market cap of S$47m, this is a significant development.

Some quotes from the announcement:

The book value of the PCB Shares disposed was S$241,000. Thus, the company will record a net profit of S$1,904,000 as a result of the disposal. The Company intends to use the sales proceeds for working capital of the Group.

By disposing the PCB Shares, the Company will have more working capital for its existing operations and/or expand into other businesses and undertake new investment opportunities which may arise in the future, and this may result in higher value to the Shareholders.

There is no mention of specific uses for the cash that will be generated by these sales. I hope a special dividend will be considered to return some of the proceeds from the PNE PCB shares to the PNE Industries shareholders.

PNE PCB shares traded around 0.30 Malaysian Ringgit for much of 2013, but are currently trading close to 1.0 Malaysian Ringgit. It looks like the management of PNE Industries is taking advantage of the strong performance of the PNE PCB shares to monetize their stake. I don’t know what caused this rise or who is buying PNE Industries’ stake in PNE PCB.

The sale of the PNE PCB shares is another catalyst for value realization for PNE Industries’ shareholders. I certainly didn’t see this one coming: neither the original write-up nor the follow-up post even mentioned the PNE PCB stake! I was aware of this asset, but I didn’t assign any value to it, because PNE PCB’s results were erratic and the investment was carried on the books at just a few million.

It just illustrates what I tried to show in the follow-up post: often you don’t know if a catalyst emerges, let alone when. That doesn’t really matter if you buy cheap enough and don’t bet too big on any individual opportunity. A good performance by a few of these shares in your portfolio makes up for the sleepers that don’t perform in a particular year.

Disclosure: long PNE Industries

Posted in Singapore stocks and tagged .

NeverLoseMoney

Author of ValueInvestingBlog.net. Private investor.

15 Comments

  1. Kind of surprising that they are selling in the open market. I figured they would’ve struck a block deal with another party. Bit disappointing in the news release: “The Company intends to use the sales proceeds for working capital of the Group.” . As if they haven’t got enough working capital yet 🙂 Nevertheless a good development I think. Can’t have it all with a net-net, we’ll see how things turn out.

    • Yeah, I expected a block sale as well.
      Btw: I don’t understand why Yahoo Finance and FT.com show a 52-week high of 1.03, while the company said shares were sold at 1.10. How can that be? Any idea?

      I think the “working capital” statement is just a blanket statement. I’m hopeful we’ll see a special dividend or increase of the regular dividends.

  2. Pardon my ignorance, based on this sentence I thought it is a direct transaction with a third party?
    “The PCB Shares were sold via direct business transactions on Bursa Malaysia
    Securities Berhad for an aggregate consideration of RM5,500,000 (equivalent to
    S$2,145,000 based on an exchange rate of S$1.00 to RM2.5641). The consideration
    will be paid to the Company in cash on settlement date.”
    Which explain why RM1.10 is not reflected as week high yet.

    I went to the EGM and I have the following observations and deductions :
    – PNE Ind seems to be in discussion with some party to sell PCB shares but no confirmation yet.
    – They seem to be very sure that the transaction will be closed very soon.
    – The PCB price to sell should be at or above the NTA of RM0.94.
    – The buyer is not any of the PNE Ind directors.

    The issue now is whether it is part or all the PCB shares that PNE Ind is selling. Also, I am confused now of the present development. If the buyer is buying all of the PCB shares, why is he only buying 5 million shares now instead of all? The PCB price should now be trading around RM1.10 hence the buyer will have to pay more to buy more shares. To add to my confusion, PNE Micron is also selling itself though not more than 30%. I am not sure if this has anything to do with PNE Ind development.

    However, whatever it is brewing it should be positive for PNE Ind. My bet for the sales proceed from the PCB shares is special dividend base on the speed of the development.
    Please note that the above are my personal deductions.

    • Hi Jack,

      Thanks for your comments about the EGM!

      I think you’re right about it being a transaction with a third party. I was confused about the term “direct business transactions” in the announcement and I thought these meant sales on the open market.

      I’m also wondering why just 5 million shares were sold and who the buyer is. It doesn’t make much sense for PNE Ind to sell just the 5 million shares and I think they’ll be looking to get out entirely. We’ll know soon enough I guess.

  3. Another 14m shares were sold on July 1 at RM1.10: link

    About 9.1m shares left:

    The Company now holds 9,125,000 PCB shares, representing 13.9%
    shareholding interest in PNE PCB Bhd. The Board will continue to seek opportunities to
    dispose the remaining PCB Shares in accordance with the terms of the Disposal Mandate.

    And this time the possibility of a special dividend was also mentioned in the announcement:

    The Company may consider declaring a special dividend upon completion or substantial completion of the disposal of the remaining PCB shares depending on the aggregate consideration received and the working capital requirements of the Group at that time.

    • Sounds like good news & stock is moving accordingly.

      I’m wondering, how do you keep track of your SGX companies? Ideally I would like to receive an email whenever one of my investments uploads a new filing. That doesn’t seem possible with the SGX website, as far as I could see. PNE news also doesn’t show up in my Yahoo Portfolio nor in Google Finance. So right now the best I can do is check the SGX website regularly. There should be a smarter method ..

      • Until today I just checked SGX.com too. But I just found a forumpost from a guy that uses a German site: FinanzNachrichten.de. You can register for free and create a watchlist. It should e-mail an alert whenever a new announcement is made on SGX.com and it has a RSS feed for this as well. It looks like a good tool and I hope that can save us some time. Adding tickers to the watchlist didn’t go flawless for me, because that page seems buggy as hell, but I did manage to add my holdings in the end.

        Apparently there’s also an app called “SG Stock Alert” that provides alerts for new filings: iTunes and Android. I have no experience with the app though.

  4. Within 1 hour of opening on Wednesday morning, 11 million PCB was sold between RM1.10 to RM1.22! I think the whole PCB shares has been sold off at a way above price of RM1.10. The profit of the sale should increase the NTA of PNE Ind by at least 3c. I am really confused by the whole development, but am happy. Hopefully, they can give a special dividend of 5c maintaining the NTA of 20c. The 3rd quarter should be due soon. We should also know who the buyer of PCB by Thursday.
    Cheers!

  5. Hah, very buggy site indeed. But looks like it works for now. Prefer to get all that spam in my email, not on my phone 🙂 Thanks, cheers!

  6. A $0.02 dividend has been declared: link

    The Board wishes to declare an Interim Dividend of $0.02 cents per share, using the proceeds from the sales of PNE PCB Bhd’s shares.

    The Share Transfer Books/Register of Members will be closed at 5.00 p.m. on 22/07/14 and reopened on 23/07/14. The Dividend will be paid on 31/07/14.

    • Not sure if I am reading too much, I think there are more coming since they declared as interim dividend rather than special dividend. Also, I think there are still 9 million PCB shares not sold yet. By the way, my mistake PNE Ind does not announce quarterly result.

  7. I sold my position today. Book value should be around $0.23 after the disposal and dividend and I had some orders in the market already around that level. All got filled.

    Probably due to the news that management managed to sell a large part of their stake at a nice premium (~ $.30): http://infopub.sgx.com/FileOpen/AnnSaleofShares.ashx?App=Announcement&FileID=306832

    Still, I am happy with my decision. don’t see why I should hold on to this above tangible book. Huge gain + dividend in a few months. Thanks for bringing this to my attention!

    • You’re welcome! It’s nice to see that this idea worked out so well.

      The management sale is the latest surprise in this story. The number of positive developments that have occurred recently is quite surprising: improved earnings & a dividend increase, sale of PNE PCB and then a special dividend (not sure if the management sale is a positive). I would have been happy if just one of these things occurred. We’ve been fortunate to have all these things occur in a relatively short time.

      I agree that this is probably a reasonable price for the business.

    • I still own it. Tried to sell in July when it was around book value, but I didn’t have GTC orders in at the time. The stock then declined pretty quickly and it kept missing my limit sell orders. A bit unlucky there.

      It does look cheap again. The trading division had some problems and there were some impairments there. The contract manufacturing division continues to do well though. Management says they are scaling back the trading division, so I don’t think that should be a big problem.

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