Addvalue deal: do the values add up?

IF EVER there was an example of a corporate development that was a candidate for a "Trade With Caution" (TWC) notice from the Singapore Exchange (SGX), it is Addvalue Technologies' latest announcement. Addvalue said on Tuesday that it planned to sell its wholly owned subsidiary, Addvalue Communications (AVC), to a China buyer for an astounding $330 million in cash.

Since Addvalue's shares resumed trading yesterday following the announcement, its price has surged 9.4 cents or 149 per cent to 15.7 cents on heavy volume of 198 million shares traded. Clearly, the company has already gone a long way to achieving its goal of rewarding its loyal shareholders, an objective explicitly stated under its "rationale for the disposal".

Setting aside the bounty that shareholders are now enjoying, there are a few burning questions that have to be answered for the benefit of many sceptical observers. Who exactly is the buyer and why would it pay the princely sum of $330 million for a subsidiary of a company when that company, even after yesterday's massive share price rise, still only commands a market capitalisation of about $185 million?