Transview (Retailer/ distributor - golf equipment)

The company announced a terrible news on 15 Dec 05 - the loss of distributorship for its recently acquired subsidiary!

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The Board of Directors of Transview Holdings Limited (the "Company") wishes to
announce that its subsidiary, Winston’s Golf Pte Ltd ("Winston") has today received an
official notification from its principal, PING Inc. (USA) that Winston distributorship
agreement for PING brand of golf equipment would not be renewed upon expiry on 24
January 2006 due to a change in PING Inc. distribution strategy.

Transview management is currently waiting for further information from PING Inc. with
regards to transition details.

The management is now assessing the financial implications of this development and
the implication will be reflected in the Group’s full year results announcement due to be
released sometime next week.

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The company has just acquired the financially distressed Winston in Jun'05, for its prized USA distributorship for the PING brand, a distributorship that has been held for 35 years. For the acquisition, Transview paid the following:

1. Loan to Winston for settlement with credit $411K
2. Payment to DBS $2.8M

Hence, a total outlay of $3.2M

Winston asset acquired:
Total asset of $6.3M, with total realisable value of $3.1M on a going concern basis, of which $2.6M is the market value of its property in Eunos Techpark.

Assuming that due to the loss of the distributorship, Winston is forced to be liquidated, it is likely Transview would have to make a loss provision, but the question is how much. Since Transview's consideration for acquisition was $2.8M, NRV is $3.1M, there is a negative goodwill of $300K, against the $411K loan, a difference of $111K. Hence, the minimum loss should be $111K and should not exceed this value by very much unless the value of the property drop significantly over the past 6 months.

The management probably can foresee some problems on this acquisiton hence the lower consideration was paid. However, having said that, it is important to note that distributors for consumer goods can be quite at risk for a loss of the distribution rights as the principal can easily switch to another partner or even enter the market on its own (case of C&C for its Mercedes brand cars). Perhaps, distributionships for non-consumer goods may be subject to a lower risk in this area due to more specialised knowledge required and probably more value add.

In view of such development and the recent decreasing sales trend, it is likely that Transview would experience difficult years ahead although it still has a huge cash backing of $13.6M or 9 cts/share as at 1HFY05 (2HFY05 would be less due to payment for Winston). Hence, I should be looking for an opportunity to divest my stake unless the up coming results could come in a positive surprise on its sales and GP numbers. Without the results and hence know actual impairment loss, it may not be wise to dispose off my shares as the results may not be as bad as write-off the whole investment.

Price @ 11.5 cts (-0.5) as at 16 Dec 05)