Is something cooking in HG Metal?

On Aug 15, 2006,
HG Metal secured refinancing by entering into a $10,000,000 convertible loan arrangement with OCBC Bank @36.1cts. FYI the share price was 45cts on that day.

On 13 Dec 2006,
HG Metal's share price dropped to as low as 24cts.

On Jan 5, 2007,
OCBC converted $3,176,800 for 8,800,000 shares.

On Jan 8, 2007,
SGX gave its in principle approval for 2-for-5 rights issue at 20cts per share.

There is also a special dividend of 4cts per share to partially assist to pay for the rights issue.

On Jan 19, 2007,
Its share price closed the week at 51cts. The shares are trading on a cum-all basis till Feb 5, 2007.

I am curious with the following questions.

1. Why would OCBC be interested in HG Metal with 4.76% stake?
2. On what basis did HG Metal convince OCBC to accept the convertible deal?
3. While banks are encourage to diversify their non-core assets, are banks allow to take these relatively "tiny" equity positions?
4. In 4 months, OCBC's $10mio convertible loan is in the money with a return of 41%. Will OCBC be holding on to the shares from conversion? Any more conversion to be expected from OCBC before Feb 5, 2007?

Does anybody out there got any answer to the above?

Business Trust - What is that?

There is a bit of hype going on with Business Trusts as a new investment class. Hyflux is already a benefactor.

What is a Business Trust (BT)?
Essentially, BT is a vehicle that allows investors to collectively own an asset with the following features:-

• stable predictable growth in earnings,
• stable cashflows and;
• low capital expenditure requirement in the near future ie. a generally completed infrastructure.

The BTs are set up as trusts rather than traditional companies. BTs are subject to corporate income tax rates.

Some examples of such asset would be power plant, water production plant, refining facilities, a plane, a ship, an oil tanker, etc.

It is similar to REIT. REIT focuses on properties.

Investors should generally focus on income yield. Capital appreciation is limited to those with longer term perspective.

Tang Plaza is actually in different parts now!!!

Hi guys,

This is a follow up to my earlier story on CK Tang's 2nd offer to take the company private.

In BT dated Jan 8, 2007, Mr Wong Wei Kong has recommended that the minority shareholders should just take the monies and run. His basis was the gloom n doom about retail business, the track record of its management in the business, blah, blah, blah,...

But are we missing the point?
The sum of whole is worth more than in parts.

The freehold hotel/retail complex - known as Tang Plaza - is a strata titled property. CK Tang owns only its department store space, giving it only about 28 per cent of the total share value in Tang Plaza. The rest of the complex is a Tang family holding, as is Marriott Hotel.

Can you imagine the Tang brothers putting 28% of Tang heirloom at risk? Of course not. Thus the Tang brothers are trying to re-secure their control of that 28% with the 2nd offer.

The sum of whole is worth more than in parts. Think about it!!