Accept exit offer for Aztech, says independent financial adviser Stirling Coleman Capital

INDEPENDENT financial adviser (IFA) Stirling Coleman Capital on Thursday told the independent directors of Aztech, the object of a delisting offer, to recommend that shareholders vote in favour of the delisting resolution.

"We are of the opinion that the financial terms of the exit offer are fair and reasonable, and not prejudicial to the interests of the independent shareholders," Stirling Coleman said.

It added: "We have considered the rationale for the delisting proposal, and they appear to be based on sound commercial grounds."

In September, Aztech's co-founder Michael Mun had proposed to delist the mainboard-listed company with an exit cash offer of 42 Singapore cents a share. Mr Mun, who is also Aztech Group's chief executive and chairman, will carry out the voluntary delisting through his special purpose vehicle called AVS Investments Pte Ltd.

In its analysis, the IFA noted that the group's financial performance has been declining and the group had incurred net losses for FY2015 and the first half of 2016.

The economic conditions and outlook of the industry also look bad. Because its business also includes providing marine logistics related support, it has been hit by protracted weakness in the global marine industry. More provisions made for "inventory obsolescence" has also affected the results from its electronics segment.

The IFA also noted that the share price has been trending downwards after the share consolidation and capital reduction exercise, and has consistently traded at huge discounts to the trailing net asset value (NAV) per share over the 24 months leading up to the exit offer. Trading volume of the shares has also been low.

In assessing the exit offer price, it noted that the discount to the group's revalued net asset valuation (RNAV) as at end-June 2016 is slightly lower than the median and slightly higher than the simple average of the discount of the share price to NAV of the conglomerate companies.

It warned that the NAV may not be fully realisable at its book value or revalued value within a short time frame, given that the assets held by the group are very specialised, and the market value of these assets vary depending on market and economic conditions and availability of a buyer. In fact, the NAV may deteriorate further if the group continues to incur losses.

In the same document, the independent directors also said that after "prudent deliberation", they concur with the advice of the IFA and recommend that shareholders vote in favour of the delisting resolution.