Pacific Century Regional Development- delisting imminent if share buybacks continue

Since our  report  highlighting PCRD&rsquo s aggressive share buybacks and suggesting that this may be a prelude to majority shareholder Richard Li potentially privatising the company, PCRD has not shown any intent to restrain its share buyback activities. In the past 9 months, the company has acquired a further 89.1 million shares, shrinking the public float to a precariously low 10.2%. We estimate that the company can only acquire and cancel a further 5.1 million shares before its trading has to be halted pending a delisting decision to be made. 

Figure 3.  Aggressive share buyback from PCRD has shrunk public float precariously close to 10% threshold

To recap a point made in our update  report  on 5 May 2015:

&ldquo Under the current regulatory regime, there are a few ways that PCRD' s privatisation could take place: through a general offer, a scheme of arrangement, a voluntary delisting or a forced delisting by SGX due to low free float (< 10%) coupled with an exit offer. Based on current circumstances, we see the last two as the most likely options. Both would require a reasonable exit offer to be tabled and the appointment of an independent financial adviser (" IFA" ) to opine on the fairness of the offer as stipulated in the SGX listing rules. We note that IFAs tend to benchmark fair value of a company' s shares to the market prices of its underlying assets where such values are available as in the case of PCRD. As such, we do not expect any exit offer, if it materialises, to deviate greatly from the fair value computed using this methodology in order to obtain a positive recommendation from the IFA.&rdquo

Figure 4.  PCRD&rsquo s key underlying assets, HKT and PCCW, are up 6.9% and 3.5% respectively in the last 3 months and has held up well vs HSI, which declined 17% over the same period.

As at 22 January 2016, PCRD&rsquo s stakes in PCCW and HKT, both of which shares have held up well despite the recent market turmoil, is worth a total of S$0.61 per share. While it remains to be seen if the &ldquo reasonable&rdquo offer by Richard Li comes close to matching the market value of PCRD&rsquo s underlying assets in the event the mandatory delisting and exit offer is triggered, we believe that that any IFA appointed will use this as a benchmark to base its recommendation on. Richard Li would thus find it hard to justify offering an amount that is significantly less. With the shares trading at $0.37 as at 22 January 2016, we believe PCRD still has significant upside. 

 

Quoted from  here