RSENA (5270) - (Tradeview 2017) Value Pick No. 8 : Red Sena Bhd. (5270)
Dear fellow readers,
This is my No. 8 Value Pick for 2017.
Once again, these writings are just my
humble highlights (not recommendation), feel free to have some intellectual
discourse on this. You can reach me at :
Telegram channel : https://telegram.me/tradeview101
Website / Blog : http://www.tradeview.my/
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or Email me to sign up as private exclusive subscriber :
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______________________________________________________________________
Value Pick No. 8: Red Sena Berhad
(Initial Valuation RM 0.50 - RM0.55 sens)
This is the first time we called for a SPAC
related counter. SPAC stands for special purpose acquisition company. RedSena
primarily is in the sector of F&B. The reason we are interested in RedSena
is due to the arbitrage opportunity play.
This is a rather safe investment. The risk
to reward ratio is there with limited downside. For those feeling jittery about
the market conditions, we think it is a good idea to look at Red Sena. Based on
our calculations, investors stand to earn ~6.4% return p.a., assuming an entry
price of 45sen.
Date
|
Share Price /
Fair Value
|
Total Return
|
Annualized Return
|
Apr-17
|
0.450
|
||
Dec-17
|
0.488
|
8.4%
|
9.7%
|
Dec-18
|
0.503
|
11.7%
|
6.4%
|
Do recall, the IPO price for Red Sena was
50sen and 92% of the IPO proceeds (i.e. 46sen) was set aside into a trust
account to acquire a suitable F&B business over a 3 year period (Dec 2015 -
Dec 2018). In the event that management fails to identify any potential target
within this timeline, the money in the trust account, including interests
earned, will be distributed back to investors.
On the flip, if Red Sena develops a liking
for an F&B business and propose for an acquisition, investors can still get
back their money by voting ‘NO’ during the EGM. To note, the quicker that this
event occurs, the annualized return to investors is higher as well. On a per
share basis, we estimate that the cash amount is 48sen and 50sen at Dec-2017
and Dec-2018 respectively.
We think this is a relatively safe
investment strategy to adopt, especially for yield seeking/risk adverse
investors. That said, if the company identified by Red Sena provides an entry
into an exciting/high growth F&B business, we believe further share price
upside is possible.
Overall, we advise investors not to jump
into the bandwagon by simply buying Red Sena at the market offer price as it
would lower your total return - every 0.5 sens could potentially lower your
total return by 1%. Hence, one should patiently look to accumulate this stock.
From the management, side the company
consists of a team of F&B professionals with substantial experience in their
respective fields. From how we look at it, the team running the company is very
professional. For SPAC, because it is in effect a shell company, the management
team is crucial as they are the one who will determine the direction of the acquisition
and path of the company. Having a strong management, will set it on strong
footing compared to other SPACs.
Based on the latest news flow, Red Sena is
looking to acquire the business in Vietnam and currently have made a list of 50
potentials. The management is looking to close the deal by early 2018. You can refer to the relevant news here:
http://www.thestar.com.my/business/business-news/2017/02/15/red-sena-sets-its-sights-on-vietnam/
*Please note this is a SPAC
stock. For those who do not have such appetite, feel free to skip.
______________________________________________________________________
Telegram
channel : https://telegram.me/tradeview101
Website
/ Blog : http://www.tradeview.my/
Facebook
: https://www.facebook.com/tradeview101/
or
Email me to sign up as private exclusive subscriber
: tradeview101@gmail.com
Food for thought:
RSENA (5270) - (Tradeview 2017) Value Pick No. 8 : Red Sena Bhd. (5270)
http://www.tradeview.my/2017/05/tradeview-2017-value-pick-no-8-red-sena.html
