Wednesday, December 19, 2012

These 2 small developers may be gearing up for privatisation

Are they joining the bandwagon?

According to OCBC, as a group, SC Global (before its privatization offer), Wing Tai and Ho Bee, are now valued at 0.76x books value, still belowaverage levels seen over 2Q09-2Q11.

Here's more from OCBC:

Given the current environment of low borrowing costs and steep trading discounts to RNAV for high-end developers, 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%.

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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