TIH unveils S$133m deals as transformation makes headway

Singapore

IT's been a good 11 months since mainboard-listed private equity firm TIH Limited made the sensible move to regroup its asset management business by ending a nearly 20-year pact with a third-party manager and absorbing all 13 employees to form its own unit TIH Investment Management.

A tad long perhaps, but it made up for the dearth of concrete news since by announcing two deals collectively worth some S$133 million on Monday - a big step for the firm which has long trumpeted its plan to expand beyond its waning private equity and venture capital business.

The firm's subsidiary, TIHT Investment Holdings (TIHT), has completed the acquisition of minority stakes in Singapore-listed manufacturing services firm CEI Contract Manufacturing and Japan's fifth largest life insurer Mitsui Life Insurance from Temasek Holdings for S$129 million.

TIH did not disclose details of the stake in these companies but based on filings to the Singapore Exchange, CEI disclosed that TIHT became a 9 per cent shareholder of CEI on Sept 4.

Post completion, the part cash and share deal will see Temasek emerge as a 45 per cent shareholder of TIHT through an indirectly wholly-owned subsidiary while 55 per cent will be held by TIH's wholly owned Killian Court.

It's somewhat of a milestone for TIH, which in May this year shed its old name Transpac Industrial Holdings to put its chequered past behind and is eager to reconnect with the market, especially now that its capital is no longer managed by a third party. "We want to reach out to shareholders and improve our communication with them. This is part of our transformation," said TIH Investment Management chief executive Mr Allen Wang in a media interview.

It may also shore up market confidence in the firm which lost S$620,000 over the first half period ended June 2014 from a S$44 million profit a year ago as TIH can now boast that through TIHT, it has tied up with Singapore's investment giant Temasek, indeed a big plus which, Mr Wang himself is quick to add, marks a "vote of confidence".

TIH shares failed to nudge upwards on Monday, ending the day unchanged at S$1.23 but it belies the share's 11 per cent rise over the past one week after the counter fell to a one-year low of S$1.11 last Monday.

Separately, TIH also announced that it inked a shareholders agreement with three wholly controlled subsidiaries of Argyle Street Management - a Hong Kong-based asset manager and majority owner of TIH - to invest in Garden Road Holding Ltd, a firm set up solely to acquire assets of an optical components and module manufacturer.

Garden Road Holding shareholders have committed a total capital of US$13.5 million of which TIH's share is US$3 million (S$3.81 million). The firm said the interested party transaction represents some 3.28 per cent of TIH's latest audited net tangible asset value of S$116.18 million as at end December 2013, which brings the total value of transactions entered between TIH and Argyle Street Management and its related units for the current financial year to some S$34.34 million.

According to Mr Wang, TIH has also applied to the Monetary Authority of Singapore for a Capital Markets Services licence for fund management. "Now that we have acquired the expertise (for investment management) and have an in house team and no longer have to pay others to manage our own capital, we want to manage money for other people to generate fee income. We are optimistic about getting the licence," he added.

In December last year, under an "internalisation" exercise, TIH ended its investment management agreement with Transpac Capital which cost TIH some S$13.8 million and hired all the latter's employees.

"The most significant milestone in the last 20 years is that we are no longer reliant on other people. In future when we grow, we don't have to pay management or performance fee to anybody and it will go back to our shareholders," he added.

In 2013, TIH forked out S$1.33 million in management fee to Transpac Capital and the year before that, in 2012, it paid out a management fee of S$1.84 million and net performance incentive fees of S$3.49 million.

Since then, TIH has been eager to broaden its business scope which has culminated in the latest developments which according to Mr Wang, is part of its three-pronged transformation strategy - to be an asset manager, to acquire assets from secondary portfolio (such as the recent one with Temasek) which would have a short to medium term investment horizon and thirdly, to undertake long-term value investments by snapping up significant minority to controlling stakes in businesses.

"We are looking to generate more stable dividend for our shareholders so we want to have a portfolio that can return stable income and at the same time, we don't want to lose out on potential capital gains," he added.

"We are not pretending to be an expert in running some of these businesses (such as Mitsui's insurance business)but our expertise in corporate finance and cross border mergers and acquisitions could help in their expansion plans," he added.