Time & date: 10 am, Tuesday, 30 July.Venue: King Wan Corp, 8, Sungei Kadut Loop.
DESPITE BEING held in the out-of-the-way industrial estate of Sungei Kadut, the AGM attracted a crowd of shareholders.
King Wang's MD, Chua Eng Eng, happily remarked at the start of the meeting that it was the biggest attendance (25-30 shareholders, by my reckoning) she had encountered at the company's AGM.
Ms Chua Eng Eng, 42, is MD of King Wan Corp. Photo: CompanyThe management and shareholders alike would have been happy too that the stock price of King Wan rose 35% last year and added another 60% in the year to date.The catalysts: the divestment of its stake in two Thai associates for a hefty profit and the resulting likelihood of a hefty multi-year special dividend, as suggested by several media articles and analyst reports (starting with Special dividend to come from high yield stock KING WAN? in Sept 2012).
King Wan (recent market cap: S$112 million) sold its shares in the two Thai associates last year to Kaset Thai Industry Sugar (KTIS) in a 5%-cash-95%-share deal worth S$50.9 million.
King Wan, whose core business is mechanical & electrical engineering in the construction industry, has said it intended to sell the KTIS shares it will be issued with when KTIS is listed on the Thai Stock Exchange.
L-R: CFO Francis Chew, MD Chua Eng Eng, Executive chairman Chua Kim Hua, Independent directors Lim Hock Beng & Goh Chee Wee, Executive Director Chua Hai Kuey. Photo by Wayne Koo
Here are some key takeaways from the AGM:
1. Is there a delay in the IPO of KTIS?: This was evidently topmost on the minds of shareholders.
Management said with effect from July 3, the SEC (Securities and Exchange Commission) of Thailand had allowed KTIS to start marketing its shares.
The SEC is in the midst of evaluating the IPO application.
Within 45 days of July 3 (ie, before August 18), the SEC is expected to grant approval for the listing. Upon receiving the approval, KTIS has up to 6 months to list its shares. This can be extended by another 6 months.
KTIS is expected to choose to list its shares when investor sentiment is deemed to be positive.
To fix its IPO price, KTIS will do book-building first. (For background on King Wan's link with KTIS, read: OSK-DMG initiates coverage of King Wan with 40-c target)
2. Divesting KTIS: King Wan will not sell all its KTIS shares at one go as "we believe this company has long-term growth potential," said Ms Chua. She elaborated on the various business segments of KTIS.
King Wan holds S$48 million worth of KTIS shares, which could translate into a 2-3% stake in the listco.
KTIS reported about US$100 million in net profit last year, and is slated to be the No.1 largest listed sugar company in Thailand.
3. Special dividends: For FY13 (ended March 2013), for the second year running, King Wan will be paying 1.5 cents a share as ordinary dividend.
The disposal of KTIS shares would place the company in a position to reward shareholders further.
Asked to comment on analyst reports by SIAS Research and OSK-DMG about King Wan being able to pay special dividends for several years, management said the analysts had studied King Wan's cashflows and track record of rewarding shareholders with special dividends.
"We don't think their assumptions are wrong."
OSK-DMG analyst Lee Yue Jer has noted in a report that the M&E business currently contributes S$5m-7m of cash, which easily pays for the 1.5 cent ordinary dividend totaling S$5.2m.
The analyst said if King Wan wanted to, it could sell the KTIS shares gradually and be able to pay 1.5 cent a share as special dividend annually over 10 years -- assuming the sale price is S$48 million in aggregate.
"This doubles the dividend to a juicy 9.7% yield sustainable for the next 10 years," according to the analyst.
4. Business direction: Management said King Wan will stay focused on its core business of mechanical & electrical engineering but will look for investment opportunities in other business segments.
It had taken a 30% stake in a 58,000 dwt Supramax bulk carrier costing U$21m ship in January 2013 purely for investment.
Sold by a shipyard after the original buyer couldn't complete the purchase, the ship had come "pretty cheap" to King Wan and has been chartered out from March 2013 to a reputable charterer at US$9,500 a day for three years.
With the charter rate locked in for that period, King Wan is assured of positive cashflow and is looking forward to a capital gain in the years ahead when ship prices go up with an upcycle in the shipping sector.
If another ship comes at an attractive price, King Wan would consider investing in it.
Recent story: CIMB underweighs REITS, SIAS ups King Wan's target to 42 cents
