CH Offshore: New player on board

Falcon to acquire Scomi’s stake for S$0.70 per share. CHO’s largest shareholder, Scomi Marine, has announced that it has entered into a conditional share purchase agreement with Falcon Energy to dispose its entire 29.1% stake in CHO (205m shares) for a cash consideration of S$143.5m or S$0.70 per CHO share. Upon completion of the transaction, CHO will become an associate of Falcon Energy.

Who is Falcon Energy? Falcon Energy is a Singapore-listed oil and gas service provider, with an operational track record of 30 years. It focuses mainly on the production phase of oilfield activities, and owns and operates a fleet of vessels comprising mainly of work/accommodation vessels. It is helmed by Mr Tan Pong Tyea, Executive Chairman and CEO, who has over 20 years of experience in the industry, supported by a team of industry veterans.

A positive change for CHO? While it is not immediately clear to what extent Falcon will be involved in CHO’s daily operations, we believe that synergies such as enlarged business network, cross-selling of services, and broadened scope of services could be extracted from association with its new major shareholder, given the complementary businesses.

Deal underscores CHO’s attractive valuations, maintain BUY. We maintain our BUY recommendation on CHO as we believe this deal underscores CHO’s attractive valuations. Although the deal does not trigger a general offer, we believe the transacted price and our estimated asset breakup value of CHO’s AHTS fleet of S$0.67 should limited downside to its share price. Our TP is unchanged at S$0.87.