For details specific to the Broadway Industrial takeover
On October 28, 2024, Patec Pte. Ltd. (“Patec”) initiated a mandatory conditional cash offer to acquire all issued and paid-up ordinary shares of Broadway Industrial Group Limited (“Broadway Industrial”) not already owned or controlled by Patec. The offer price is S$0.197 per share.
Offer Details:
Offer Price: S$0.197 per share.
Premium Analysis:
7.1% premium over the last traded price of S$0.184 on October 25, 2024.
27.1% premium over the 12-month volume-weighted average price up to October 25, 2024.
Book Value Comparison: The offer price represents a 7.5% discount to the net asset value of S$0.213 per share as of June 30, 2024.
Background of the Offeror:
Patec is an engineering solutions provider specializing in the metal-forming industry, with business units in engineering solutions and components manufacturing. The acquisition of Broadway Industrial aligns with Patec’s strategy to expand its product and service offerings, leveraging Broadway’s manufacturing presence in Thailand, China, and Vietnam.
Acceptance Considerations:
Broadway Industrial’s shares have exhibited low trading liquidity. The offer provides shareholders an opportunity to exit their investment at a premium without incurring brokerage fees.
Broadway Industrial reported earnings of S$8.7 million for the half-year ended June 30, 2024, reversing a prior loss. However, future performance may be influenced by market conditions and integration outcomes post-acquisition.
Valuation Metrics:
Price-to-Earnings (P/E) Ratio: Based on the half-year earnings, the annualized EPS is approximately S$0.038, resulting in a P/E ratio of about 5.18x at the offer price.
Price-to-Book (P/B) Ratio: The offer price reflects a P/B ratio of approximately 0.92x, indicating a discount to the company’s book value.
Analysts have noted that while the offer provides a premium over recent trading prices, it is below the company’s net asset value, suggesting that shareholders may need to weigh the immediate liquidity against potential long-term value.
Summary and Offer Comparison
| Valuation Method |
Intrinsic Value (S$) |
Comparison to Offer Price (S$0.197) |
| Discounted Cash Flow (DCF) |
0.197 |
Equal (Fair Value) |
| Price-to-Book (P/B) |
0.234 |
16% Below |
| Price-to-Earnings (P/E) |
0.228 |
13.6% Below |
Conclusion
Based on these valuation methods:
- DCF suggests the offer price is fair.
- P/B and P/E valuations suggest the offer undervalues the company by 13-16%.
Potential for Revised Offer:
There is no indication from Patec that the offer price will be increased. Shareholders should consider the current offer terms in their decision-making.
Implications of Acceptance or Rejection:
If Accepted: Shareholders will receive S$0.197 per share, and Patec aims to delist Broadway Industrial, leading to cessation of public trading.
If Rejected: If Patec does not achieve sufficient acceptance to delist, shares may continue trading, but liquidity could remain low, and future share value is uncertain.
Offer Timeline:
Offer Announcement: October 28, 2024.
Offer Declared Unconditional: November 14, 2024, upon Patec acquiring over 50% of voting rights.
Extended Closing Date: December 23, 2024, at 5:30 PM.
Action Required:
Shareholders wishing to accept the offer should follow the procedures outlined in the Offer Document, ensuring all forms are submitted by the closing date to receive payment within seven business days of acceptance.
Conclusion:
The offer provides an immediate exit at a premium to recent market prices but below the company’s net asset value. Shareholders should assess their investment horizon, liquidity needs, and confidence in Broadway Industrial’s future performance when deciding to accept or reject the offer.
Thank you
