27 December 2014

Buyout interest in euNetworks (a GKGoh associate)

There is quite a bit of coverage in this week's The Edge on GKGoh, especially over the possibility of a buy out of euNetworks, an associate company.

Strange that there is so much interest in euNetworks considering that it has been loss making thus far. The potential probably lies in its role as an incumbent of fibre networks in major European cities. It is likely difficult for any new entrant to be able to lay new networks in such mature cities.

Meanwhile, GKGoh continues to trade at a discount to its book value (P/B is 0.72). So that remains attractive to me personally. I always find it strange when a company is valued below its book value when there is no apparent reason. Unrecognised value, or simply the norm for an investment holding company to suffer a discount?

I particularly like its holding of Boardroom, another stock on the SGX, and its Australian aged care holding. Boardroom has shown steady business and dividend payout. The Australian holding will likely provide a regular income stream as well.

I like that the founders/insiders have been buying their own stocks regularly in recent months.

A key risk lies in that the original founder is already 70 years of age and is looking at his succession. He has two sons in the company. Will the next generation be able to run the investment holding company as prudently and successfully?

See previous assessment:
G K Goh - who is this guy?

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