0128 - Frontken

German Investor Emerged as Frontken largest shareholder

Amidst the market weakness over the last few months, surface treatment specialist Frontken Corporation Berhad has possibly seen a change in control after Jorg Helmut Hohnloser, a German investor, acquired 119.75 million shares from Frontken Executive Chairman cum Managing Director Wong Hua Choon on 25th October. Hohnloser ended up with 172.5 million or 17.1% of the company after the latest acquisition. Hohnloser’s stake is held under Kim Eng Securities Pte Ltd. Wong, who was Frontken’s single largest shareholder with direct stake of 21.2% before the share sale, ended up with only 9.4% direct stake. He still owns another 2.3% indirectly via Frontken Holdings Pte. Ltd.

The Hohnloser Group owns Cleanpart. Germany based Cleanpart Group is a leading B2B provider of advanced engineering services for the semiconductor industry and related industries for over 35 years. It is believed Cleanpart is amongst the largest surface engineering and coating company in the world.

Since Hohnloser bought the stake from the current previous largest shareholder and still let him run the show for now, it is most probably a friendly deal. But why did Wong sold the stake to Hohnloser when the share price is trading at its multi year low? Is it done to facilitate a much bigger corporate exercise at a later stage?

 

Cleanpart Group is still an unlisted entity now but it now effectively “controls” two listed vehicle of the Frontken Group. Is Cleanpart going to privatize the whole Frontken Group or to merge the group with itself and seek a listing in a bigger stock exchange? Only time will tell.

 

While Frontken share is depressed, its warrant FRONTKN-WA appears to be very resilient and trades at expensive valuation. Its premium has surged to 111.5% while its implied volatility at 128.8% far exceeds the underlying share historical volatility. This kind of valuation suggests investors are hopeful for a strong rebound of the mother share who has hit a high of 25 sen early this year. It is also important to note that Wong is still the largest warrant holder with about 50 million warrants.

The Warrants Specialist

It is interesting to note that the second largest shareholder in Frontken Taiwan OTC listed subsidiary Ares Green Technology Corporation ,according to its latest annual report, happened to be Kim Eng Securities as well. Is this stake held on behalf for Hohnloser as with the case in Frontken Corporation Berhad?