LHN’s logistics subsidiary attracts privatisation offer

SINGAPORE – Shanghai-listed Milky Way Chemical Supply Chain Service has made a privatisation offer for LHN’s 84 per cent-owned subsidiary, LHN Logistics, in a move which could potentially rake in around $32 million for LHN.

The offer price of 22.66 cents per share represents a 45 per cent premium to the six-month volume weighted average price of LHN Logistics and a 35 per cent premium to the current price of 16.8 cents.

The offer price for LHN Logistics also indicates a 10-times forward fiscal year 2024 price-earnings ratio for the stock, while LHN currently trades at a price-earnings multiple of around five times.

Established in 2003, LHN Logistics runs a fleet of 74 prime movers and 356 trailers, providing transport services for all types of cargo.

Milky Way has obtained an irrevocable undertaking from Fragrance, which beneficially owns 54.04 per cent of LHN, to procure LHN to accept the offer, making the deal almost a sure thing.

But besides approval from its major shareholder, the deal also has to have written consent from JTC Corporation for the change in ownership in LHN Logistics subsidiary Hean Nerng Logistics, located at 7 Gul Avenue.

A formal offer announcement will be made once the two conditions are satisfied by Aug 3, following which the offeror plans to delist and privatise LHN Logistics.

LHN hived off its logistics unit

and listed it on the Singapore Exchange Catalist board in 2022 at 20 cents per share. Although profitable, the stock has not had much traction in the market, and has languished at around current levels for much of the year.

Market insiders see this as a good deal for the parent, as the offer price is attractive and the logistics business is non-core to the space optimisation business, which LHN is engaged in.

LHN runs the profitable and fast-growing Coliwoo serviced apartment and co-living chain in Singapore and the region. In all, it has about 1,700 keys, a figure expected to grow to 2,500 by the end of 2023.

Analysts see the funds from the LHN Logistics sale possibly used by the parent to pare down its borrowings, with some portion also used to give a payout to its shareholders via a special bonus.

Recently, after announcing strong core interim earnings, LHN announced an interim dividend of one cent per share. Analysts reckon that if the company can pay out between 1.5 cents and two cents in additional bonus later in the year, the stock price could be re-rated upwards.

LHN closed at 34 cents on Thursday.