QT Vascular seeks 'new lease of life' from Mongolia mining, energy with S$1b RTO

Singapore

MEDTECH may be in vogue as investors seek out rare listed high-growth plays in Singapore, but QT Vascular (QTV) is bidding farewell to that business.

The Catalist-listed firm is emptying out its balloon catheter business, so a more traditional play in the form of a Mongolian mining and energy group can be injected in.

In a filing on Sunday, QTV said it is looking to acquire the entire interest in Tengri Coal and Energy (TCE) for S$1 billion in cash and new shares, and the deal is expected to result in a reverse takeover (RTO) of QTV.

Conditions precedent include QTV disposing all its existing assets and liabilities, so that it will become a shell company.

It will seek approval from the Singapore Exchange (SGX) and its shareholders at an extraordinary general meeting (EGM) to be convened.

TCE's wholly-owned operating entities are Tengri Petrochemicals, which holds mining licences issued to mine coal deposits in Bayan sourm, Tuv province in Mongolia, and Tsaidam Energy, which holds licences to construct power plants and energy facilities in the country.

TCE plans to build and run an electricity supply business in Mongolia.

QTV's board of directors said the RTO will give the company "a new lease of life" and could potentially increase its market capitalisation.

QTV will be able to venture into a new business area in the coal and energy industry in Mongolia, which has potential for growth and "significant potential upside", the board added.

The target group - including TCE and its subsidiaries - posted net losses before tax of some US$516,000 in 2019, net liabilities attributable to shareholders of about US$2.2 million and net tangible liability value of about US$2.3 million as at Dec 31, 2019. These figures are based on the group's unaudited consolidated financial statements as at Dec 31, 2019.

However, the target group's financial statements did not take into account the actual valuation of TCE's assets, which will be based on an independent valuation to be completed before the EGM, QTV said.

The independent valuation will take into account all permits and licences to mine half a billion tonnes of coal located in the middle of Mongolia near major infrastructure; all designs, permits and licences to build and operate a 600-megawatt (MW) coal-fired power plant; and all designs, permits and licences to build and operate the required electricity transmission infrastructure.

It will also take into account the executed agreements with a Chinese state-owned enterprise to provide 85 per cent debt financing for the power plant's construction.

The remaining 15 per cent will be provided by a New York venture capital firm. In addition, the independent valuation will consider the 25-year off-take agreements for all of the 600MW of generated power from the coal-fired plant.

To pay the S$1 billion purchase price, QTV will fork out a cash deposit while the balance will be satisfied by issuing new shares to the seller. For illustrative purposes, assuming the deposit is zero, the purchase price will be fully paid by issuing 186.27 billion new shares in QTV at about 0.537 Singapore cent apiece. The illustrative issue price is at a 10.5 per cent discount to QTV's share price of 0.6 cent on Aug 20.

QTV has signed a conditional sale and purchase agreement with the seller, Phoenix Capital Enterprises.

As it is likely that the TCE group may be eligible for a mainboard listing on SGX, QTV plans to seek a transfer of its listing to the mainboard. It also proposed to undertake a share consolidation exercise to comply with mainboard rules for a minimum issue price of S$0.50.

In July, QTV announced that it had entered into a non-binding term sheet to sell its drug-coated peripheral balloon-catheter product product line Chocolate Touch to G Vascular for up to S$20 million.

QTV shares rose 0.1 Singapore cent or 14.3 per cent to close at 0.8 cent on Monday. About 93.5 million shares changed hands, making it the fourth most actively traded counter by volume for the day.