Towards Financial Freedom
Ocean Sky - Trading Below Cash; 12% Dividend Yield
Ocean Sky divested its entire Apparel Operations for USD55m and its two properties in Hong Kong for HKD57m. It will distribute special dividend of SGD0.016/share from the disposals. This leaves it with a possible cash hoard of USD92.8m - USD102.8m, which is 1.3x - 1.4x its current market capitalisation of SGD88.5m. Our SOTP valuation is in the range of SGD0.266 - SGD0.294, a 35% - 49% upside.
Cash balance larger than market capitalisation. Following these transactions, Ocean Sky will realise a net gain of USD17.0m, while NTA / share will rise from USD0.181 to USD0.206. It will have a possible cash hoard of USD92.8m - USD102.8m. This is 1.3x - 1.4x its current market capitalisation of SGD88.5m. Ocean Sky intends to use its cash to explore potential new business opportunities, such as the construction business.
Attractive 12% dividend yield. Ocean Sky will distribute final dividend of SGD0.008 / share for FY12. Including the special dividend, it will distribute SGD0.024 / share. This translates into an attractive yield of 12.4%.
35% - 49% upside. Management has not announced what it intends to do with its remaining associate construction company, although we think it may increase its stake. As management did not disclose the amount of cash that relates to its Apparel Operations, we have assumed three scenarios. Taking those into account and pegging a 5x P/E to its associate investment, we arrive at a range of SGD266 - SGD0.294 / share SOTP valuation.
Source: OSK
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