Here is a potentially interesting activist situation at play in Singapore. Quarz Capital Management (Quarz) recently published an open letter to the board of directors of HG Metal Manufacturing (HG), an SGX-listed stockist and manufacturer of steel products.
Based on their analysis, HG’s shares are trading at a “fire-sale” discount of ~60% to the company’s highly liquid and easily-valued net asset value per share. In their view, the shares offer upside opportunity of at least 40% by 2018. To help realise this value, Quarz has pushed the HG board to sell its non-core minority stake in BRC Asia and also pay out a portion of their excess cash balance as a dividend to shareholders.
Quarz is a value-oriented investment advisory firm with offices in Singapore and Zurich. They are “active” investors who aim to identify as well as narrow valuation gaps in publicly-listed companies globally. According to their website, they focus on fundamentally sound businesses that demonstrate the potential for value-enhancing operational, financial or strategic change.
Havard Chi, the Singapore-based head of research at Quarz, said in a Bloomberg interview last year that Singapore is a “treasure trove of undervalued small- and mid-cap companies” and that the firm had built up a pipeline of potential investee companies. Quarz had previously targeted Metro Holdings in 2016, although that hasn’t quite worked out as planned (to date).