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"Hold out for better offer" says Lim & Tan to TTJ's minority shareholders

Goola Warden
Goola Warden • 2 min read
"Hold out for better offer" says Lim & Tan to TTJ's minority shareholders
Reflections at Keppel Bay, one of TTJ's past projects
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On May 20, TTJ Holdings’ major shareholders via THC Venture has made a voluntary conditional offer (VCO) for the shares in TTJ it doesn’t own at $0.23 cents per share. Teo Hock Chwee owns 84.4% and his daughter 0.1% of TTJ. The announcement says THC Venture, the offeror, intents to privatise the company and does not intend to preserve the listing status of TTJ if it ends up holding more than 90%.

The rationale for the offer according to the preliminary May 20 announcement appears compelling. Shareholders can realise a premium over the market price without incurring brokerage costs. Based on TTJ’s 1HFY2022 announcement, (the company has a July year end) labour shortages are likely to persist in the short term and output of the construction sector is expected to remain below pre-pandemic levels throughout 2022.

The domestic construction sector is expected to face higher material costs in 2022, largely from persistent supply chain bottlenecks, alongside rising energy prices due to geopolitical tensions, which have exacerbated global inflationary pressures, the announcement says.

Despite these challenges, the Offer Price represents a premium of approximately 33.6%, 28.8%, 28.0%, and 29.4% over the volume weighted average prices of the shares (“VWAP”) one-month, three-month, six-month and 12- month periods respectively, up to and including May 12, 2022, the last trading date prior to the May 20 announcement.

The company, for its part, would save on maintaining its listed status, including compliance and associated costs. Since its IPO on April 1, 2010, TTJ has not raised any equity. According to the company’s 1HFY2022 results, the company is in a net cash position of $29 million. In addition, it holds financial assets of $1.7 million and non-financial assets of $1.4 million.

“Although this offer of $0.23 represents a premium over its VWAP price, the deal puts TTJ Holdings to be valued at 0.63x book (NAV 37 cts). Additionally, given that they have $32 million net cash (and financial assets), or 9 cents per share and record order book of $187 million, we think management is being opportunistic in an attempt to privatise the company on the cheap just as the inflection point of the construction sector [is at hand for an] upturn. Note that this offer is not final, and taking the above into consideration, we recommend investors to hold out for a better offer,” says Lim & Tan in a May 23 update.

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