Friday, June 11, 2010

WBL continues to streamline operations, sells Applied Engineering

WBL Corp today announced that it has reached a conditional agreement to sell its wholly-owned Applied Engineering Pte Ltd to Advanced Holdings for a cash consideration of $18 million. Applied Engineering specialises in the design and fabrication of process equipment such as pressure vessels, shell & tube heat exchangers and other equipment, and supports the petrochemical, oil and gas industries both in Singapore and the region.

The sale for $18 million looks like a good deal (on WBL's part), given that the book value of Applied Engineering Pte Ltd on WBL's books is only $8.5 million. The sale price is twice of the carrying value, and the proceeds will be in cash, which may be deployed to other parts of the business, or returned to shareholders in the form of a special dividend. $18 million is no paltry sum, especially when there are only about 280 million shares outstanding (assuming full conversion of convertibles and including dilution for ESOS). Currently, there are about 250 million outstanding shares, which means the latest sale represents cash of about $0.072 per share. The company still has a substantial cash horde of $435 million (as of end March 2010), which increases the possibility of a special dividend.

We are hardly worried about the lowered profit contribution from WBL's "Engineering and Distribution" business following the sale, as the segment only contributed earnings of $2.9 million in 1H 2010. Other businesses in the "Engineering and Distribution" segment include Far East Motor (automobile servicing and repair), SPC Wearnes (bottled LPG), Pacific Silica Pty Ltd (silica mining), O’Connor’s (engineering systems), Polytek Engineering (laundry, boiler and washroom equipment and accessories), Wealco Equipment (water jet propulsion) and Welmate (architectural ceiling and partition systems).

While the remaining businesses may not see such generous buyers, it is likely that they may be sold off in the near future as WBL continues to streamline its operations to concentrate on property development and technology.

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