双炮将 (Double Cannon Checkmate) – Chuan Hup and Falcon Energy
I don’t really like to reveal my trades, but as I would like to record my experience, opinions and logic on this blog, this necessitates a blog post.
Back in Dec 2014 during the oil price crash, Falcon Energy made a bid for CH Offshore, which was one of the major holdings of Chuan Hup. However, given the paltry price, the takeover offer for CHO shareholders seemed to be a dud, although the share price did move match the offer price. It was then I decided to make one of my most daring moves in my entire investing experience – buy both sides of the coin.
The reason behind this move was twofold – firstly, I wanted to take advantage of the oil price crash recently, so I was shopping for an energy counter that had good dividend returns and was not so diversified as a blue chip stock like Noble, and secondly, I wanted value out of another counter that was energy-related which is somewhat diversified, like a mini SembCorp Industries – basically, I was aiming for the upstream and midstream companies for oil production. It just happened that Falcon and Chuan Hup made the news, and I decided that it would be those two, because ultimately, if the deal goes through, technically it would be a “left pocket to right pocket” transaction, assuming market equilibrium – but everyone knows that’s not the case. CH Offshore wasn’t in my sights, as the boat had already left the shore.
Subsequently, after my purchase, Falcon did a share buyback, which brought the price up, and recently, when all three counters halted on the same day, it was made known that Chuan Hup decided to let go of their holdings to Falcon. My worry was whether Falcon could endure the selldown, given that CH Offshore is mainly involved in deep sea oil, and it seems that the market hasn’t punished Falcon…yet. Of course, the price of Chuan Hup and CH Offshore went up, and thus, my analogy of a chinese chess move called 双炮将 (Double Cannon Checkmate) is complete.
Finally, as an end note, however much paper gains I’m sitting on right now, ultimately, the biggest winners were CH Offshore shareholders, not me.