NRA Capital Pte Ltd

Written by: Jacky Lee

Wednesday 28 May 2014

Serial System – Sell its entire 13.6% investment stake in Jubilee Industries Holdings

Take the gains first and put the risk behind

No change to our operating forecasts and keeping our fair value at S$0.19. Maintain Overweight.

Serial System Ltd announced that SCE Enterprise Pte. Ltd., a wholly-owned subsidiary, had on 26 May entered into a sale and purchase agreement with WE Holdings Ltd. to dispose of SCE's entire equity interest of 31,878,000 ordinary shares in the capital of Jubilee. The Sale Shares represent approximately 13.6% of the entire issued share capital of Jubilee as at 26 May 2014. The Disposal was completed on 27 May 2014. The group no longer has any equity interest in Jubilee, and has ceased to be a substantial shareholder of Jubilee. The aggregate consideration paid in cash by WE Holdings for the Disposal, excluding transaction costs, is S$7,714,476 (US$6,142,000). The Disposal will result in the Company recording a gain of S$1,734,526 (US$1,381,000), net of fair value reserve of S$1,995,200 (US$1,588,000) which was previously taken to equity...

Valuation:

We believe this is a positive move for Serial System as the mould maker Jubilee Industries has been struggling to turn profitable. Last year, Jubilee Industries was planning to acquire a 60% stake in a development project in Medini Iskandar in a proposed reverse takeover (RTO) which included a profit guarantee of RM180m. However, Jubilee said in February, the deal was extended by six months to end August as it needed more time to carry out due diligence in connection with the proposed acquisition.

As the stake was a non-core asset, there is no change or impact of the sale on our operating forecasts. However, the disposal enables Serial to realise its investment returns in Jubilee, and also avail itself of cash which can be deployed into its core businesses and/or utilised for other business opportunities. We keep fair value at S$0.19 and maintain our Overweight recommendation.


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