Tan’s resignation came three months after CSE Global announced on March 5 that it was undertaking a strategic review “with the objective of maximising shareholder value”, following a request from its controlling shareholder. Jefferies Singapore was appointed as the financial advisor. In two subsequent monthly updates, CSE Global indicated that the review is still ongoing.
“Shareholders should be concerned with any differences of views with regards to working with controlling shareholders, given that the management is the key value driver for the company,” CSE Global said in the same June 2 filing.
Our reading of what CSE Global meant is that the management team, backed by the controlling shareholders, is now busy driving value for the company. This arrangement is working fine, and it is a distraction to work through “unresolved differences” with anyone else, including the board’s lead independent director.
Based on the company’s latest annual report, Heliconia Capital Management, a subsidiary of Temasek Holdings, is the single largest controlling shareholder with a 23.79% stake. In 2020, Heliconia Capital Management paid $57.7 million for a 25.03% stake from Malaysia’s Serba Dinamik International.
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The founding of CSE Global dates to 1985, when it was an engineering projects division of Chartered Electronics Industries, the electronics arm of what later became Singapore Technologies Engineering.
In the past year, with the data centre boom and a lucrative long-term partnership with Amazon, CSE Global’s share price has jumped more than 280% to $1.65 on June 3, positioning it as a classic pick-and-shovel play riding the AI boom.
In short, Heliconia Capital Management is sitting on very handsome returns of more than 266%, excluding dividends. With analysts now broadly bullish on the stock, including RHB with a target price of $1.94, this may be an opportune time to cash out and leave some upside for the potential buyer.
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Typically, a strategic review covers options such as privatisation, stake sales, spin-offs or divestment of business units. Given these developments at CSE Global, could Tan’s resignation be linked to how the board and the controlling shareholder are assessing the strategic review?
For now, this appears to be the only explanation for the “unresolved differences” mentioned in the filing. CSE Global’s shareholding structure is fractured. Heliconia Capital Management and the 19 other top shareholders collectively own a 75.51% stake in the company. Besides Heliconia Capital Management, the other top shareholders are nominee accounts.
An astute investor could be drawn to companies with such a shareholding structure, as they could acquire a large block of CSE Global shares without triggering a general offer threshold, yet still gain effective control through efficient use of capital.
If a bolder assumption is made, an offer for Heliconia Capital Management’s stake may have been on the table, but the board led by Tan could have disagreed and preferred that the same offer be extended to all shareholders through an outright privatisation.
Despite the “differences in views”, Tan — as lead independent director at CSE Global — perhaps should have stayed on to represent the interests of minority shareholders. It is natural to have differing views within organisations; there is also a responsibility to fulfil one’s duties.
