MINORITY shareholder Pangolin Investment Management is "strongly" advising shareholders to reject Digileap Capital's "derisory" exit offer of S$0.56 a share for Challenger Technologies at an upcoming extraordinary general meeting.
It deems the offer price too low and unfair for minority shareholders, and believes that Challenger should be valued by its cash flow to shareholders instead of metrics such as historical trading prices and net tangible asset values.
"We reckon the fair value of the shares to be at least S$1.15, based on its free cash flow every year and excess cash on the balance sheet," Irvan Mondro, director of the Singapore-based fund management company, said in a three-page argument released on Thursday. The company's Pangolin Asia Fund has a 2.94 per cent stake in Challenger.
In essence, Pangolin thinks that Challenger is holding too much cash on its balance sheet. If the retailer pays out more of its earnings as dividends to shareholders, Pangolin thinks the share price should "naturally react" and potentially more than double to S$1.15. The stock lost half a cent to finish at S$0.56 on Friday.
Pangolin said that for the cash-rich IT retailer which has 38 stores in Singapore and a customer base of half a million Valueclub members, as well as online tech marketplace Hachi.tech which serves as an important future growth engine, an offer price of S$0.56 is just low-balling.
Challenger also has a net cash position of S$63 million as at end-2018, which is about a third of its market capitalisation. For its full year ended Dec 31, 2018, the retailer's net profit rose 22 per cent to S$19.5 million, on the back of a 1 per cent dip in revenue to S$320.2 million. It has no debt due this year.
Pangolin said: "In a challenging market and despite a shift to online purchasing, Challenger has managed to maintain strong sales and profitability."
More at https://www.businesstimes.com.sg/companies-markets/pangolin-investment-says-exit-offer-for-challenger-is-too-low