Thursday, December 20, 2012

Spate of privatization likely by 2013

Guess two property firms likely to go private.

As indicated in its last residential sector report on Jun 2012, OCBC Investment Research noted that there is deep value embedded in high-end developer stocks. As a group, SC Global (before its privatization offer), Wing Tai and Ho Bee, it said, are now valued at 0.76x book value, still below average levels seen over 2Q09-2Q11. Given the current environment of low borrowing costs and steep trading discounts to RNAV for high-end developers, OCBC predicts that it is likely that a spate of privatization activity lies ahead.

"We believe potential candidates for privatization include those are trading significantly below fair value, have a low public float, and have major
holders with stakes above 50%," it said.

Possible privatization candidates, it said, Ho Bee and Wheelock.

Here's from OCBC:

From our criteria, we find two likely candidates for privatization: Ho Bee and Wheelock. Ho Bee is currently trading at 0.76x book, with a public float of 25% and a majority shareholder stake of 69%. Wheelock is currently trading at 0.79x book with a 24% public float and a major shareholder stake of 76%. Already we have seen the main shareholder of SC Global, Simon Cheong, make a voluntary unconditional cash offer of S$1.80 per share for all issued ordinary shares.

One possible implication of privatization is that, as a non- foreign company, SC Global could avoid the qualifying certificate penalties related to not selling off projects two years after achieving TOP.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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