Eng Wah Wins Support For Property Sale

Source : The Business Times, September 11, 2008

Next EGM could prove trickier for management

THE first extraordinary general meeting (EGM) was a straightforward one, but expectations are that the second meeting could be a lot trickier.

At Eng Wah Organisation's EGM yesterday, some 40 or so shareholders gave strong support for the proposed sale of the company's Mandarin Theatre in Kallang Bahru to Carilla Pte Ltd for $13 million.

This price is significantly higher than the property's net book value of $1.1 million as at March 31, and also represents a premium to its $12.8 million appraised value as at June 5.

The company's asset sale came after it entered into a reverse takeover deal with Japanese pharmaceutical firm Transcutaneous Technologies to buy over its business by issuing new shares. One of the precedent conditions is asset sales.

However, all eyes are on the next EGM when the management seeks shareholders' approval to sell another four properties to its founder and controlling shareholder Goh Eng Wah, and his daughter, managing director Goh Min Yen, for $99.48 million.

The properties - Jubilee Entertainment Complex in Ang Mo Kio, Toa Payoh Entertainment Centre, Empress Theatre in Clementi and the 16th floor of Orchard Towers - are part of a portfolio of assets put up for sale last November, but the search for buyers has proved controversial. At the heart of the matter is whether those asset sales were transparent enough and if the prices are right.

Last month, the Securities Investors Association of Singapore (SIAS), which represents retail investors here, called on Eng Wah to be more transparent in the sale of its properties, asking it to 'ensure that the sale price is maximised'.

In response, the firm stressed that the proposed sale price to Mr Goh was based on the value of the assets determined by property consultants Chesterton International and CB Richard Ellis, amid negative market sentiment and a depressed credit environment.

Both Mr Goh - who has a deemed interest in 70 per cent of Eng Wah's shares and is also executive chairman of the company - and Ms Goh will abstain from voting on the transaction. That means Eng Wah's minority shareholders will have the final say on whether the sale takes place.

Yesterday, BT spoke to a number of shareholders and found that most were satisfied with Eng Wah's response. However, the sceptics remained unconvinced, pointing to the undervaluation of those properties.

Without giving his full name, shareholder Mr Lui said that the premium offered is clearly inflated since Eng Wah did not revalue those assets despite the property boom of the past two years. 'My question is: Are the balance sheet values a true and fair representation of how much they are worth?' he told BT.

Another added:'They were sold for a song.'

One of the top 20 shareholders in Eng Wah is believed to oppose the deal, even though most investors are confident that the proposed transaction will muster enough votes to go through. But tough questions can still be expected the next time the shareholders meet.