Courts Asia Ltd (SGX: RE2) is the holding company for Courts (Singapore) Pte Ltd, Courts (Malaysia) Sdn Bhd and PT Courts Retail Indonesia. Courts is a leading retailer in Southeast Asia selling electrical, IT and furniture products. Currently, Courts operates some 80 stores across three markets of Singapore, Malaysia and Indonesia, spanning over 1.4 million square feet of retail space.
As of the time of writing, Courts Asia’s share price is at S$0.20, up 31.6% for the day. What’s the reason behind the sudden increase in the share price?
Voluntary conditional cash offer
Today, Courts Asia announced that Nojima Asia Pacific Pte Ltd, a wholly-owned subsidiary of Nojima Corporation, is making a conditional cash offer for Courts Asia at S$0.205 per share. The offer price is a premium of 35% from the closing share price of S$0.152 on Wednesday, January 16.
Nojima has received an irrevocable undertaking from Singapore Retail Group (SRG), Courts Asia’s biggest shareholder, that SRG has agreed to tender all its shares translating to a 73.8% stake in Courts Asia. Once SRG accepts the offer, the offer will become unconditional.
Nojima is listed on the Tokyo Stock Exchange with a market capitalisation of S$1.4 billion. The company is an electrical appliance retail chain mainly dealing with the sale of consumer digital appliances. Nojima has over 8,000 employees across over 850 stores in Japan and two stores in Cambodia.
Nojima has been considering entering the consumer appliance retail market in Southeast Asia, where the market is expected to grow. With the acquisition of Courts Asia, Nojima hopes to gain a strong foothold in the region.
Upon completion of the offer, Nojima may undertake a strategic and operational review of Courts Asia to realise synergies, economies of scale, cost efficiencies and growth potential. Nojima may also consider delisting Courts Asia from the Singapore stock exchange if it achieves the threshold for delisting.
For the second quarter ended 30 September 2018, Courts Asia’s revenue tumbled 6.4% to S$165.1 million mainly due to a decline in Singapore as well as Malaysia’s performance. It posted a net loss of S$3.1 million for the quarter, reversing from a net profit of S$1.5 million seen a year ago.
Looking ahead, Courts Asia’s executive direction and group chief executive, Dr Terence Donald O’Connor, said in its earnings release:
“The transformation remains a large-scale effort that will require time to manifest, particularly in Malaysia where we expect to see results in the medium to long term. That said, we are encouraged by early indicators of turnaround and continue to invest for the long term, building on the strong omni-channel and solutions leadership base in Singapore and translating that into value across the business.
We continue to stay confident in the business’ long-term prospects. We remain focused on delivering value for our stakeholders, as we prioritise business sustainability with a view to long-term growth.”
At the offer price of S$0.205, Courts Asia has a price-to-book ratio of 0.55. It does not have a price-to-earnings ratio to speak of due to negative trailing earnings.
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