31/05/2017

Activist Quarz Targets Steel Firm HG Metal;

Sees 40% Upside
(Bloomberg) -- Activist investor Quarz Capital Management Ltd. said Singapore-based steel products firm HG
Metal Manufacturing Ltd. can boost shareholder value by more than 40 percent by 2018 and urged the company
to return excess capital while refocusing on key businesses.

The hedge fund has bought a stake in HG Metal and said the company should take immediate steps to address
the severe undervaluation of more than 60 percent, of its share price to book value, Quarz said in a letter
obtained by Bloomberg.

Shares of HG Metal rose as much as 36 percent to 47.5 Singapore cents on Wednesday, before paring gains
to 29 percent. The rally brought the companys market capitalization to more than S$57 million ($41 million).

Quarz, which praised HG Metals management for achieving profits in 2016 and steering it through one of the
toughest slumps in steel prices, cited a lack of clarity on the companys plans for its cash and investors
concerns about its trading division.

The company should also scale down and/or spin off the division, putting the manufacturing business at its
core, Quarz said. The investor also proposed a review of the potential divestment of its non-core but
substantial 22.6 percent stake in a maker of steel mesh products calledBRC Asia Ltd. The activist investor
proposed that HG Metal immediately distribute as much as S$10 million through a dividend.

A representative of HG Metal said the firm hasnt received the letter and declined to comment further. Quarz,
co-founded in 2011 by Jan Moermann, a former investment banker at UBS Group AG and Credit Suisse Group
AG, has targeted Singaporean companies before. It asked International Healthway Corp. in January to oust its
board, saying the company is deeply undervalued and poorly run. Quarz last year called on Metro Holdings Ltd.
to return excess cash to shareholders.

Shares of International Healthway have surged 64 percent since Quarz made its views public, while shares of
Metro Holdings have climbed 27 percent since the investor proposed changes in October.

Klaus Wille, Abhishek Vishnoi and Kyunghee Park

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