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Disappointment descends on IPC, Raffles Education

The Edge Singapore
The Edge Singapore • 5 min read
Disappointment descends on IPC, Raffles Education
(Nov 27): The big splash that Oei Hong Leong made in the market two months ago lifted shares in IPC Corp and Raffles Education Corp sharply. But investors who attempted to ride the wave might now be underwater.
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(Nov 27): The big splash that Oei Hong Leong made in the market two months ago lifted shares in IPC Corp and Raffles Education Corp sharply. But investors who attempted to ride the wave might now be underwater.

A one-time seller of PCs that later ventured into property development, IPC said on Sept 18 that it would sell a hotel in Zhuhai for RMB200 million ($40.98 million) in cash and acquire a 51% stake in a Chinese company involved in artificial intelligence (AI) for $5.1 million in new shares priced at 40 cents each. According to a statement from IPC at the time, both transactions were being done with units of New York-listed Xinyuan Real Estate Co. The largest shareholder of Xinyuan Real Estate is TPG Group Holdings, with a stake of just 8.49%.

So, what did this have to do with Oei? The famed asset trader, who happens to be a son of Eka Tjipta Widjaja, the founder of Indonesia’s Sinar Mas Group, is the single-largest shareholder of IPC, with a 32.55% stake. And, only hours before IPC announced its transactions, Oei had unveiled plans of his own to invest US$5 billion ($6.8 billion) to build a network of data centres and other IT infrastructure in China, in what he called his “One Belt One Net” vision.

The rambling statement from Oei, disseminated to the media through a public relations firm, was accompanied by an ACRA filing on a company called One Belt One Net Pte Ltd. According to the filing, the company had been incorporated on Sept 15, 2017. Its paid-up capital was $1. Oei was its sole shareholder and one of its two directors.

On the face of it, the plans that Oei unveiled on Sept 18 had nothing to do with the transactions that IPC announced on the same day. IPC did, however, happen to use the phrase “One Belt One Net” in its own statement. Given the timing of the statements from IPC and Oei, and the fact that Oei is a large shareholder of IPC, some investors may well have assumed that IPC would be a vehicle for Oei’s stated ambitions in China.

On Sept 19, the day after the announcements, shares in IPC jumped more than 50%. They hit an intraday high of 64 cents before closing at 52.5 cents. The stock climbed a bit more the following day, closing at 56 cents. But they subsequently went into a slow slide. By Friday, Nov 17, the stock had fallen to 45 cents.

On Nov 20, IPC announced that the heads of agreement for the sale of its Zhuhai hotel and the purchase of the China-based AI company had lapsed. It did not give any reasons. With shares in IPC already down so much, there was not much of a reaction in the market. Unless Oei now uses IPC as a platform for his own One Belt One Net ambitions, the stock could continue to languish. IPC had a book value of 98 cents a share as at Sept 30.

The stock closed at 42 cents on Nov 23. A day after shares in IPC rocketed, Raffles Education was swept up by the excitement. The tertiary education company is controlled by Chew Hua Seng, who is its founder, chairman and CEO. Chew currently owns 33.6% of the company. Oei, however, has accumulated a major stake over the years, and now holds 12.88% of the company, which makes him the second-largest shareholder after Chew.

In a filing on Sept 20, Raffles Education said Oei had bought just over 6.1 million shares at an average price of 22.43 cents on Sept 17, bringing his total stake to 12.77% at the time. With shares in Oei’s IPC already running, shares in Raffles Education took off too. The stock hit a high of 36 cents on Oct 13.

Interestingly, in a move that seemed to enrage Oei, Raffles Education announced a placement of 95 million new shares at 30 cents each on Sept 28. On Oct 12, Oei requisitioned an extraordinary general meeting to remove Chew from the board and force the disclosure of the identities of the investors who took up the placement shares. In the meantime, Oei continued buying Raffles Education shares on the market.

However, on Nov 16, Raffles Education said Oei had called off the EGM. Then, in another twist, Lianhe Zaobao reported the next day that Oei was now taking Chew to court instead. According to the report, Chew and Oei had met on Oct 16 and signed an agreement that Chew would find a buyer for Oei’s shares at 44 cents each by Nov 15. No buyer was found, which Oei considered a breach of the agreement.

Shares in Raffles Education have since retreated significantly, including a particularly heavy decline of more than 7% on Nov 22. The stock closed at 25.5 cents on Nov 23.

The story of Oei’s exploits with IPC and Raffles Education might not be over. For now, however, investors who jumped in as the stocks ran up are probably feeling ra ther disappointed.

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