Thursday, 13 August 2015

What's Next For Geshen?

On 11th Aug 2015, Geshen announced an unconditional take-over offer by Pelita Niagamas on all other Geshen shares & RCPS it does not own at an offer price of 81sen.

This news came as a shocker to many minor Geshen shareholders I guess, as its share price closed at 94.5sen a day before the announcement.

Geshen's share price even reached RM1.07 a week earlier.

So the outcome is not hard to predict. Geshen's share price fell all the way down to around 81sen level.




In April 2015, Geshen completed the acquisition of 75% of Polyplas, together with issuance of 30mil RCPS.

This corporate exercise saw 53 year-old Mr Chan Choong Kong emerged as a major shareholder who holds 11mil Geshen shares (14.3%) via Pelita Niagamas, and was then given a seat in the board as an executive director.

Apparently, Mr Chan has recently acquired another 29.5mil shares at 81sen each from Geshen's two other largest shareholders Geshen Resources Sdn Bhd & Netyan Group Corporation who owned 29.0% and 12.4% of Geshen shares respectively.

Geshen Resource is a company owned by main executive directors & founder of Geshen group. Their shareholding drops to only 2.9% after the sale.

Netyan Group who first emerged as major shareholder in Geshen since 2006 has sold all its shares.

As Pelita Niagamas's shareholding reaches 52.67% after the acquisition, it is obliged to extend a mandatory take-over offer to acquire all the remaining shares and RCPS of Geshen at the same price as its purchase price, which is 81sen.

Mr Chan is keen to retain the listing status of Geshen.



In fact I'm still not too familiar with this type of event. I'm not 100% sure whether my interpretation is correct.

I hope someone who is expert in this kind of situation can explain more.

This looks similar to OSK's offer to OSKProp earlier, isn't it?

OSK bought OSKProp's shares at a price lower than its market share price and had to make a mandatory take-over offer of the remaining shares from other shareholders at that lowish purchase price, as its shareholding had exceeded certain percentage.

As a result, OSKProp share price dropped to that low level and stays low until today, mainly because of retreat in property sector in general.

Although my average price for Geshen is 57.5sen and will have 40% gain at 81sen, I'm actually not too pleased with this news as this is not what I would have expected when invested in Geshen initially.

However, I can't be too disappointed either as I still gain from this investment.

Furthermore, this acquisition just shows the confidence its new largest shareholder has on the company's future.

Anyway, what I understand that this kind of mandatory take-over is just "standard operating procedure" and usually means nothing significant.

Some shareholders might sell their shares to Mr Chan and some will not.

In the end, Geshen is still a listed company doing its business as usual, and its true value will be reflected in its share price in the future.

If its business expands and profit increases later, then its share price will go up. The opposite is true as well.

It seems like this take-over offer will last for 60 days. Will this mean that its share price will probably stay at 81sen for 2 months?

What I'm more concern is whether there will be any drastic change in Geshen's management team, even though a change is not necessarily a bad thing.

Current executive directors almost sold all their Geshen shares to Mr Chan. Will they still stay in the company to work for him?

What will Mr Chan, who looks like a fund/assets manager, do with Geshen later? I don't think he is an expert in plastic injection moulding industry.

Will he change the management or direction of the company, or inject or merge anything into it?

Will he use Geshen as his vehicle to set up his own business empire?

I think only he himself and those who are close to him will know.

Geshen is going to announce its FY15Q2 quarterly report which will include Polyplas result for the first time soon.

If the result is good, I wish to see whether Geshen's share price can break this barrier of 81sen before the closing date of the take-over offer.

30 comments:

  1. Hi BD will u keep or sell yr share?

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    Replies
    1. Hi Ken, I'll keep at least until the release of Q2 result.

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  2. Hey bro
    Should I keep or sell hevea ?
    It's had top and drop and make me anxious
    Can u give me some opinion
    Much. Appreciate

    ReplyDelete
    Replies
    1. This depends on why u bought Hevea earlier. I plan for longer term and will add more shares if it falls to certain level. However, my plan may change, depends on subsequent quarter results. I'm not too worried about Hevea at this time.

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  3. My observation is like this:

    The founders of the co Wong, Han and Teo's ages are closing to 60, the time to enjoy retirement life, travelling, taking care of grandson, play mahjong and doing medical checkup.

    Then they hv no second gen to take over the biz, as u know, this kind of biz is not staying in air-cond all the time, u hv to deal with the production lines, front line workers all the time.

    Not much sec gen willing to handle and wihstand this kind working condition although it is making handsome money. I was born 90's, so i know it, our fingers never touch the soaky water.

    so it makes sense for them to dabao the biz and sell away.

    This happens to Cocoaland, Super enterprise, SHH.......

    Btw, now my theme play is the labour intensive industrial companies then the directors are old enough and dun hv sucessions

    ReplyDelete
    Replies
    1. Recently a blogger Easy Wong talked with the CEO during its recent AGM and according to him, the CEO is ambitious in growing Geshen's business after settling its internal issues. He was even asked to buy more Geshen's shares!

      So this news of CEO selling off his stake at this time made me puzzled. May be they really wish to retire and go back to S'pore. Have to keep a close eye on subsequent development.

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  4. btw, what do u think about LNGres?

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  5. l tthink his is not a mandatory take over. It's just a SOP when a single shareholder holds more than 50%, he has to offer to take up the remaining shares. We could retain our shares as this is not a mandatory take over unless they holds Geshen up to 90% then mandatory take over will take place. 

    Many not really understand the announcement and just look on the offer price and sold off their shares. 

    To me, i will say who understand the situation will know what to do at this momemt. 

    By the way, i have sold at 950 and bought back at 810. I will hold till the till Q2 result at least. If result fulfill my estimation. I will continue to hold Geshen.

    Let's see what will happen

    ReplyDelete
    Replies
    1. Hi Issac. Thanks for your input, will see how its Q2 perform :)

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    2. Waiting for it.. think will release tomorrow. .. how much will you expect??? I expect to have around 3 cents this round...

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    3. Wowww.. really nice result... forward eps for next for 4 quarters might hit 13.5 or even 14 cents.. nice

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  6. Looks like Chan & Co. unlikely to move the counter for now, despite the good results.
    Probably have to wait til expiry of GO

    ReplyDelete
    Replies
    1. 81sen is like an insurance in this bear market. If the bear is rampant at the time when GO expires, then...

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  7. It emerges that Chan owns most (over 83%) of the RCPS as well. Presumably the company used the money for the purchase of Polyplas.
    Another SKP in the making?

    ReplyDelete
    Replies
    1. Haha, I hope so, but who will be Geshen's Dyson? Polyplas is still doing very well.

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  8. BD,
    A few weeks prior to GO announcement on 11 Aug, millions upon millions of shares pumped and dumped all the way to RM1.07 and crashing to the low of 80 sen.
    Question is , who was behind the play? Exiting majority shareholders perhaps?
    I noticed from this morning's first 15 minutes of trading, share price couldn't even get past 83 or 83.5 sen levels before being swamped by wave after wave of selling.
    Next question. Who has that many shares to sell? Stale bull holders caught during the euphoria to Rm1.07 or .....( you fill in the blanks)

    ReplyDelete
    Replies
    1. You mean Wong & co. were selling?

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    2. Wong & co was direct sold through Chan.. not thru market.. think was the big boy got the new in advance and thrown all the shares out...

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  9. BD,

    Your answer MAY apply to my 1st Question, definitely can't be for my 2nd question.

    As for my 2nd Question, someone doesn't want the share price to go up, YET.
    Who has that many shares to hold back the price from going up? Surely not Wong & Co. anymore, right?

    And why do they not want the share price to go , YET ?

    ReplyDelete
    Replies
    1. It is very obvious that the share price will be locked until the offer is expired after observed from Friday trading. Chan wants more shares from market. Be patient, after expiry date, we might see what we expected. Geshen is now very safe counter than others due to concentration of the share holding. It won't happen panic sell unless Chan throw out his shares to market. You could easily compare Geshen's graph with Klci's graph. Your patient will be nicely rewarded.

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    2. Oh.. Chan's still collecting. Haha, I'm not sensitive on that.

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  10. Well, the key is to maintain listing status, the banker find mandatory offer is an effective way to trick the ppl to gv away their shares.

    For the minorities, usually they hv paper gain on Geshen, so they dun mind to surrender their shares, but they dunno they hv sacrificed long term gain.

    Chan is likely to assign the shares to institutional funds, like Mulpha Land now called Thriven, after taek-over, then Creador's Brahmal came in.

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  11. Yes , agree. Maintaining listing status is key. Chan may have other assets to inject in later. He's astute n been in fund management for many years. He must come across all sorts of businesses and companies.

    In fact, what are the odds that the Polyplas deal was structured by him? Afterall, without him taking over 83% of the RCPS, Ge-Shen wouldn't have enough money to pay for it.

    Isaac Ong's comment is spot on. Shaking off all the punters who got caught chasing up to RM1.07.

    ReplyDelete
    Replies
    1. You all really think much more than me. I only know this company is worth to hold at the moment :)

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  12. Take-over offer sent out today and remains open until 21st Sept.

    Interestingly, the share price now has fallen to below the Offer Price of 81 sen.

    ReplyDelete