GBH - Getting no where!

Chart : GBH daily chart as of Aug 2 2014 (source: ChartNexus)

Goh Ban Huat (GBH) on July 2 announced 3 corporate proposals that includes Share Sale Agreement (SSA), Reverse Take Over (RTO) and disposal of prime land asset. 

Under the SSA, its wholly owned subsidiary, EKSPRESI TEPAT SDN BHD (ETSB) would acquire 35% equity or 3.5 Million shares of GLOBALMARINER OFFSHORE SERVICES SDN BHD (GMOS) for RM 38 Million. GMOS is an O&G company that specialize in floating production storage offload (FPSO) thus the acquisition would path the way for GBH to venture into O&G industry.

Besides the SSA, the company also entered into a Memorandum of Agreement (MOA) with DATO’ ABDUL RAHMAN BIN MOHAMED SHARIFF and  NORMALA MOHD SHARIF (Vendors) for the acquisition of the entire issued and paid up share capital of Dynac Sdn Bhd (Dynac is one of the vendor under the SSA). The MOA is basically a RTO exercise where GBH would acquire Dynac for the sum of RM 632 Million which would be satisfied by RM 210 Million cash and issuance of new GBH shares and then the Vendors would made an MGO for the rest of GBH shares for no less than RM 2 per share.

The 3rd proposal is for the disposal of the company most valuable asset, 13.93 acres of prime land, to Keladi Maju Bhd for RM 192.37 Million.

The share price of the company spiked from around RM 1.90 to RM 2.20 and peaked at RM 2.50 after the announcement. This could be due to the arbitrage opportunity that investors saw since the MGO will be made above RM 2 a share. Even some of the initial shareholders might not sold their shares after the run of the share price to wait for better offer.

But on Sep 30 the company suddenly announced that both SSA and RTO were terminated at the request of the vendors without any reason given by the vendors. It is quite surprising as personally I do think that the RTO is more 'creditable' than other diversification proposals such as PDZ and CNASIA. It again shows that MOU, MOA or any framework agreement is just a proposal and nothing  is concrete until the deal is done. Whoever jump into the counter for the arbitrage opportunity is certainly trap by now. The share price has seen falloff the cliff to trade close to RM 1.70 .   

So what is left for GBH now? Basically the company fail to venture into O&G and in the process lost their most precious land to Keladi. The only thing left is the unattractive ceramic and toiletries business and a bunch of cash.  After the disposal of the land, GBH will have some RM 237 Million cash or RM 1.275 per share without any borrowing. Of course, Tan Sri Robert Tan still here to stay and he did mentioned that the company will keep looking for new assets to be injected into the company. With a clean balance sheet, the company is indeed a good candidate for any RTO deal. Until then, the current price of the counter seems quite expensive even with the potential of capital distribution.