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