Flametree Holdings Limited (FHL) has made an exit offer in cash to acquire all the issued shares of Agva that it does not already own. Agva’s CEO (Mr Albert Lim) is also a director of FHL. FHL and Mr Lim have an aggregate interest of 76.45% in Agva. Mr Lim has undertaken to vote in favour of the delisting. Westcomb Capital will be the independent financial advisor to this offer.

The exit offer. The exit offer is 7.0 S¢ cash for each share. FHL has no intention of increasing the exit offer price. The delisting resolution and exit offer is conditional on the approval of at least 75% of the shareholdings in the company. We note that FHL and Mr Lim already more than make up that proportion. However, the delisting and exit offer is also conditional on the resolution not being voted against by 10% or more of the total number of shares in issue at the Special General Meeting.

The rationale. The trading liquidity of Agva shares has been thin. Average daily volume traded for the past six months was 24,890 shares. Agva has been trading between 3.5 S¢ and 8.0 S¢ (it hit 8.0 S¢ on only two days) for the past six months. Trades were only done on 29 days out of a total of 126 trading days in the past six months. Agva has also not raised any funds from the capital markets since its IPO in 2003.

The share options. As at 21 Feb 09, Agva has 8.1m outstanding share options. The offeror has proposed to pay a nominal sum of 0.1 S¢ for each share option Accept the offer. As at end FY08 Agva has a NAV of 6.0 US¢ per share. This includes its cash balance of US$5.9m (2.7 US¢ per share) as at end FY08. Based on current exchange rate, the NAV translates to 9.1 S¢. Agva did not declare any dividends for FY08, despite being in a net cash position and having generated profits and strong operating cash flows. We feel that minority shareholders should accept this offer, get their cash and exit this illiquid counter. We will be ceasing our coverage if and when Agva delists.