SINGAPORE - W Capital, the independent financial adviser (IFA) in the exit offer for Golden Energy and Resources (Gear), has hit back at criticisms of its opinion by the Securities Investors Association (Singapore), or Sias, and a senior correspondent of The Business Times.
In two separate statements, the IFA laid out explanations for its approach to valuing the shares of Golden Energy Mines (Gem), its valuation methodologies for the exit offer and its opinion.
Gear shareholders are to vote on two resolutions – a distribution in-specie of Gem shares and an exit offer of cash for Gear shares.
In valuing the Gem shares, W Capital said that the trading liquidity for the shares in the past 12 months had been low, with its average daily trading volume of 127,500 shares representing 0.029 per cent of the free float.
The IFA was thus of the view that the market prices of Gem shares may not necessarily serve as a meaningful reference point or indication of fair value.
The low free float and liquidity of the shares led the IFA to adopt the market approach to value Gem shares based on the enterprise value (EV) to earnings before interest, depreciation and amortisation (Ebitda) multiples of selected comparable companies.
EV to Ebitda is a financial metric used to evaluate the value of a company compared with its earnings.
W Capital also offered explanations for its valuation methodologies for assessing the distribution and exit offer. It said Sias’ allegation that the IFA had over-emphasised EV to Ebitda to set a lower bound was “grossly inaccurate”.
Sias had questioned the valuation methodology adopted by the IFA on the grounds that it was too generalised for the comparable companies.
Mr Wayne Lee, the chairman and chief executive of W Capital, said the methodology it used “is one of the most commonly used and acceptable valuation methodologies”, and “the most appropriate approach to be adopted in arriving at the estimated range of values of the shares”.
The reason for not including the entire list of Indonesian comparable companies for the Gem comparable-companies list was to prevent a skewing towards listed Indonesian thermal coal producers’ trading multiple. Instead, the IFA wanted a more comprehensive list of Singapore-listed, Australia-listed and Indonesia-listed thermal and metallurgical coal mining companies to better reflect Gear’s business profile.
W Capital also hit back at Sias’ allegation that it conflated the distribution and the exit offer. The IFA cited the letter from the Singapore Exchange, which required W Capital’s opinion to state whether the distribution and exit offer, when taken together as a single transaction, were fair and reasonable.
“The IFA letter, as contained in the circular, complies with SGX-ST’s (Singapore Exchange Securities Trading’s) directions, and there has therefore been no deliberate attempt to conflate the two corporate actions as alleged,” said Mr Lee.
The IFA acknowledges that no single method of valuation will be met with universal acceptance and humbly respects differences in views and opinions.
“The board of W Capital Markets would like to put on record that we have always been mindful and use our best endeavours to ensure that we exercise due care, skill and professional judgment in all advisory engagements, and we firmly believe that our IFA opinion in respect of the proposed distribution and exit offer is supported by reasonable grounds and assumptions,” he added.
Shares of Gear closed down 1 per cent to 94.5 cents on Wednesday.
