Synagie shares up 6.9% on proposed e-commerce business disposal

Singapore

SHARES of Synagie Corporation gained 6.9 per cent on high trading volume Wednesday, after the company said it plans to dispose of its e-commerce business for S$61.7 million which will allow it to focus on its insurtech business.

Synagie plans to distribute 18 cents per share to shareholders from the sale proceeds, if the deal is approved - nearly equivalent to its current share price.

The counter jumped to an intra-day high of 20.2 Singapore cents as at 9.01am with 11.3 million shares changing hands. Synagie shares closed at 19.4 Singapore cents on Wednesday, up 0.5 cent or 2.7 per cent with 53.7 million shares traded. The company on Wednesday morning lifted its trading halt that was called on July 30.

The deal requires shareholder approval because Synagie is selling the business to a consortium of investors that will include Alibaba Singapore and Synagie's three founders. But the proposed sale is also taking place just as Synagie guided that it will turn profitable.

The proposed deal involves Synagie's entire e-commerce, e-commerce enabler and logistics business, including the technology and business solutions tied to these businesses, Catalist-listed Synagie said on Wednesday.

Its board of directors believes the disposal will allow Synagie to realise value, given that the sale price represents an excess of about S$76.3 million over the net tangible assets of the target companies. The sale price also translates to about 20.1 Singapore cents per share, which is 106.3 per cent of the stock's closing price on July 29.

In addition, the proposed disposal will enable Synagie shareholders to realise value for their shares in the near future without exposure to future market risks in the e-commerce, e-commerce enabler and logistics business, which has needed "significant capital outlay" so far, the board said. The company has been loss-making - except for the net profit it foresees for H1 2020 - and has not paid any dividend since its initial public offering in August 2018.

Synagie will also be able to focus its resources and capital on growing its insurtech business, after the closing of the e-commerce arm's sale. The company plans to explore and pursue opportunities to acquire "sustainable and viable businesses'', it added.

In fiscal 2019, the insurtech segment brought in S$3.1 million or 16 per cent of Synagie's revenue. The segment posted an operating loss of S$282,000.

In comparison, the e-commerce business brought in the majority of revenue at S$15.4 million or 79.4 per cent, and posted an operating loss of S$7.0 million.

Named Synagistics, the consortium of investors will be led by Meranti Asean Growth Fund. The US$200 million fund invests in growth-stage startups and is managed by pan-Asian venture capital firm Gobi Partners Group.

When asked by The Business Times how the proposed deal had come about, Synagie declined to comment as the transaction is still ongoing.

Meranti and Alibaba Singapore will become shareholders in Synagistics before the completion of the proposed disposal. Synagie co-founders Clement Lee, Zanetta Lee and Tai Ho Yan will also become shareholders of the buyer.

As at Wednesday, the sole shareholder of Singapore-incorporated Synagistics is investment holding firm Metadrome, which is also a controlling shareholder of Synagie with a 23.33 per cent stake. Mr Lee, Synagie's chief executive officer and executive director, is the sole beneficial owner of Metadrome.

Both Ms Lee and Ms Tai are also executive directors of Synagie. The total shareholding of Metadrome, Ms Lee and Ms Tai in Synagistics is expected to be about 31 per cent after the closing of the proposed sale and the completion of their respective subscriptions of shares in Synagistics.

Synagie has inked a sale and purchase agreement with Synagistics as the buyer and Metadrome as Synagie's guarantor.

The proposed deal is deemed an interested person transaction. It is subject to, among other things, approval from Synagie shareholders at an extraordinary general meeting to be convened.

About S$51.8 million of the sale price will be paid in cash. Synagie said it plans to distribute this to shareholders through a proposed special dividend and a proposed capital reduction.

RHT Capital has been appointed as Synagie's financial adviser for the deal. Synagie has also commissioned Cushman & Wakefield VHS to conduct an independent valuation on the e-commerce business.

Separately, in a profit guidance issued early on Wednesday, Synagie said it expects to report a net profit for the first half of this year.

This is on the back of a one-off surge in demand from trade customers for Covid-19 related products such as masks, sanitisers, toilet rolls and thermometers.

The net profit is also due to increased e-commerce activity as a result of the Covid-19 situation and stay-home measures.