Tuesday, September 13, 2005

Sometimes they don't add up, do they?

WBL (13 Sept 05) S$3.40.

WBL is a conglomerate listed on SGX. It is closely held by the OCBC Group of companies - GE Holdings (20.7%), Straits Trading Co (11.0%) and OCBC Bank (6.1%). Recently, it was in the news in its failed bid to privatize Wearnes International. Other than Wearnes, it holds large stakes in two other technology companies, namely, Multi Fineline, a Nasdaq listed company and MFS Technology. The latter is listed on SGX.

We attempt to do a simple sum of the parts valuation to ascertain if WBL is trading at a fair price today.

(A) Stakes in companies which are listed
Entity -- WBL's stake -- Mkt Price -- Mkt Cap -- Value
Wearnes -- 85% -- S$1.27 -- S$250 mil -- S$212 mil
Multi F -- 57% -- S$43.00 -- S$1032 mil -- S$588 mil
MFS Tech -- 56% -- S$0.55 -- S$355 mil -- S$199 mil
TOTAL: S$999 mil

(B) Stakes in companies which are unlisted
WBL holds stakes in several other technology and biotechnology companies. It also holds investment properties. As it is difficult to value unlisted entities and properties without performing a revaluation, we shall conveniently assign zero value to WBL's portfolio of unlisted entities.

Shares outstanding: 172 mil.
Therefore, value per share = S$5.80.

At today's price of S$3.40, this represents approximately 40% discount to its value. When will the value be unlocked? It's anyone's guess.



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