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Published February 26, 2014
UIC bid values SingLand more richly than peers
But SingLand assets, with steady recurring income, deserve higher premium, say some analysts
By
Kenneth Lim [email protected]
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For what it's worth
[SINGAPORE] United Industrial Corp's (UIC) privatisation bid for Singapore Land (SingLand) values the property developer more richly than its peers, but not by enough to convince every analyst that the offer is attractive.
SingLand shares edged up by 0.2 per cent, or two cents, to close at $9.44 yesterday, a day after parent UIC launched a $9.40 per share bid to take the property developer private.
The UIC offer represents a 31 per cent discount to SingLand's revalued net asset value (RNAV) of $13.70 per share, according to average estimates compiled by The Business Times from four brokers and yesterday's closing prices. RNAV reflects the analysts' view of what a company's net assets are worth at current market prices, as opposed to the booked value.
In the context of the sector, the UIC offer values SingLand more richly than the average estimated 40.1 per cent discount to RNAV for other Singapore-listed developers, according to BT's poll.
The fact that UIC is willing to pay a premium to peers is not surprising.
" Taking companies private usually dictate a premium against the market," OCBC analyst Eli Lee said.
But whether the valuation is attractive beyond the takeover premium is a question that has split Shenton Way.
DMG & Partners analyst Goh Han Peng reckoned that SingLand's assets on their own are deserving of a richer valuation than comparable stocks.
" SingLand deserves a premium over its peers in the real estate sector as substantially all of its assets are in office, retail and hotel sectors, which tend to generate steady recurring income as compared to the more lumpy property development segment, which currently makes up a small part of SingLand's RNAV," Mr Goh said. " Operating risk is much lower as a landlord and SingLand has a large portfolio of prime real estate properties such as Singapore Land Tower, Clifford Centre, The Gateway, SGX Centre 2 and the Marina Square hotels and retail complex. Investment properties are highly marketable assets especially those with good rental streams as these can be packaged into Reits and sold at close to market value."
Mr Goh noted that recent deals, such as UOL's privatisation of Pan Pacific Hotels Group in 2013, came close to RNAV.
" UIC's offer is unattractive as its price does not reflect the intrinsic qualities of SingLand's assets, as well as the undervaluation of its hotels (in the Marina belt)," Mr Goh said.
Maybank Kim Eng analyst Wilson Liew, however, thought that " under normal circumstances, it would be hard to envision SingLand trading at such rich valuations compared with its peers" .
Mr Liew said that the UIC offer was worth accepting.
" Prior to the privatisation offer, our target price was $8.20, and we had a " hold" recommendation as we saw little upside given the lack of positive catalysts and poor trading liquidity," Mr Liew said. " As the offer came in at a 15 per cent premium to our own fair value and prices the company at relatively rich valuations on the back of the smaller-than-peers discount, we view the offer as attractive and have advised shareholders to accept the offer."
At CIMB, analyst Donald Chua noted that " SingLand has a very robust capital structure with a very low net gearing ratio. Hence, a premium may be warranted if one looks solely at financials" .
In a report, Mr Chua thought that institutional investor Silchester International Investors may not be willing to let go of its 8.2 per cent SingLand stake at UIC's offer price.
" We think that UIC may have to up its price," Mr Chua said. " History suggests that the Wees (who own about 54 per cent of UIC) and JG Summit (which owns about 37 per cent of UIC) will not overpay."
The offer by UIC, which owns 80.4 per cent of SingLand, represents an 11.24 per cent premium to the last traded price of SingLand on Feb 19, and includes a proposed 20-cents-per-share final dividend payout for the financial year ended Dec 31, 2013.
JUNWEI9756 ( Date: 21-Nov-2011 17:29) Posted:
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Do not SELL cheaply to UIC!!!!!!!!!!!!! Give the minority the fair value of $13!!!!!
UIC made an unconditional cash offer for all the issued and
paid-up ordinary shares in the capital of Singapore Land, at
an offer price of S$9.40 per share. The price offered
represents an 11% premium to last transacted price, and
c.8% premium to average price traded over the past 12
months. Based on the offer price, UIC will pay a maximum
of S$762m for the remaining 19.6% stake in Singland
(c.81m shares), representing 18.8% of UIC?s market cap,
and will be funded by internal resources and external
borrowings. UIC offered the following rationale for its offer:
(a) the opportunity for cash exit for investors, given low
historical trading volume and (b) the ability to consolidate
and optimise Singland?s resources and operations.
ozone2002 ( Date: 24-Feb-2014 13:32) Posted:
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SP Land NAV on 31st Dec 2013 is $13.07
UIC offering $9.4? shareholders at the losing end again!!! my take do not sell cheaply to UIC
*DJ UIC Offers To Buy Remainder Of Singapore Land Shares At S$9.40/Share (2014/02/24 10:29AM)
SONG SONG!!.. as highlighted before Sp land P/B was only 0.7.. 30% undervalued.
ozone2002 ( Date: 05-Aug-2013 10:28) Posted:
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just now 302 lots buyers.
now 709 lots. thats like 6.6m of funds wanting to buy (at $9.40)
Still trading halt? Why no news?
pending release of annoucement.
bad news?
or delisting news?
price took a beating.
Due to all the new property hikes implemented?
Exchange: SGX
Stock: Sp Land(S30)
Signal: Bullish MACD Crossover
Last Done: $8.78
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Singapore Land Limited |
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Slow and Steady, But Lacks Catalysts |
Results unexciting and in line with expectations. SingLand reported a 2Q13 core PATMI of SGD48.3m (-3% QoQ +14% YoY), after excluding net revaluation gains of SGD98.9m. 1H13 core PATMI of SGD97.9m was in line with expectations, making up 48% of our full-year estimates. We expect core operations to remain relatively flat in 2H13, with few positive catalysts in sight. Maintain HOLD.
Stronger uplift in recurrent income expected from FY15. On a QoQ basis, SingLand reported relatively flat growth in rental and hotel income. We see little upside from office rental reversion and management is cautious about the outlook for the hotel industry on the back of slower visitor growth, new supply pressure and the ongoing labour crunch. The bright spark is likely to come from its retail exposure, but the extension wing at Marina Square is expected to be completed only in 4Q14.
Residential sales have been weak. Sales at SingLand’s 109-unit Mon Jervois have been weak, with 10 units sold as of June (out of 22 units launched) at an ASP of ~SGD2,100 psf. Nonethless, we expect SingLand to launch another two projects in this year, namely the 445-unit JV with UOL at Bright Hill Drive called Thomson Three (est. ASP SGD1,500 psf) and its own development at Farrer Drive to be known as Pollen & Bleu (est. ASP of SGD1,800 psf).
Getting closer to privatisation? SingLand’s parent company, UIC, continued to inch-up its stake up until 12 July, and UIC now has an 80.3% stake in the company. Including Silchester’s 8.2% holdings, SingLand’s free float now stands at 11.5%, merely 1.5% away from the required 10% minimum free float to remain listed. We expect UIC to continue to chip away at the free float should the share price remain at current levels.
Maintain HOLD. We tweak our TP to SGD9.75, pegged to a 25% discount to RNAV on the back of higher valuations for Marina Square, but due to the lack of near-term catalysts for the stock, we maintain our HOLD recommendation. Singapore Land – Summary Earnings Table
FYE Dec (SGD m)
2011A
2012A
2013F
2014F
2014F
Revenue
615.3
580.6
447.2
490.2
689.6
EBITDA
264.9
248.2
166.5
195.2
270.9
Recurring Net Profit
214.8
218.6
200.1
224.1
270.4
Recurring Basic EPS (SG cts)
52.1
53.0
48.5
54.3
65.6
EPS growth (%)
4.7
1.8
-8.5
12.0
20.7
DPS (SG cts)
20.0
20.0
20.0
20.0
20.0
PER (x)
11.3
9.3
12.6
16.8
13.9
EV/EBITDA (x)
15.0
16.5
25.3
21.0
14.7
Div Yield (%)
2.2
2.2
2.2
2.2
2.2
P/BV(x)
0.8
0.7
0.7
0.7
0.7
Net Gearing (%)
4.2
6.6
8.2
6.1
3.9
ROE (%)
6.9
7.9
5.6
4.1
4.8
ROA (%)
5.5
6.3
4.3
3.2
3.8
Consensus Net Profit (SGD m)
225.5
245.5
253.0
back up to 9.1..
investors have taken their 20c divy