Offer price for SC Global fair: independent advisers

[reporter2]

http://www.straitstimes.com/premium/...offer-20121227

SC GLOBAL PRIVATISATION MOVE

Shareholders advised to accept offer

It's reasonable, say independent financial advisers appointed by firm

Published on Dec 27, 2012

By Yasmine Yahya


INDEPENDENT financial advisers appointed by SC Global have recommended that shareholders accept founder Simon Cheong's offer to take the developer private for $1.80 a share.

PrimePartners Corporate Finance said in a statement posted on the Singapore Exchange website yesterday: "We are of the opinion that, on balance, the financial terms of the offer are fair and reasonable and are not prejudicial to the interests of minority shareholders."

Mr Cheong, the chairman and chief executive of SC Global, launched his privatisation bid on Dec 5 through his wholly owned investment holding company MYK Holdings.

The offer values the firm at $745 million.

PrimePartners noted that after SC Global had released its third-quarter results last month, two analysts had given the stock an average target price of $1.14.

Mr Cheong's offer of $1.80 represents a premium of about 57.9 per cent to this target.

PrimePartners added that SC Global shares had not traded at or above $1.80 since Dec 1, 2010, until Mr Cheong made his offer.

Since then, the stock has surged past $1.80 and yesterday closed two cents lower at $1.925.

"There is no assurance that the market price and trading volume of the shares will be maintained at the prevailing level... after the close of the offer," PrimePartners said.

Mr Cheong had said in his privatisation offer that a share listing was making little sense given that SC Global had not raised funds from the capital markets for six years and few of its shares were traded each day.

PrimePartners also noted that the offer price is 0.8 times that of SC Global's revalued net asset value (RNAV). RNAV is a measure of the value of a developer's properties.

The price-to-RNAV ratio in this offer is higher than that of two other comparable transactions, PrimePartners added.

Developer Allgreen's privatisation was priced at 0.78 times of RNAV and Wing Tai's partial offer at 0.62 times of RNAV.

SC Global's second-largest shareholder, Wheelock Properties, has argued that Mr Cheong's offer undervalues the company.

It said on Dec 13 that the stock's share price at the time represented "a discount of some 40 per cent to 50 per cent of RNAV".

Wheelock bought 1,066,000 shares in SC Global at about $1.81 on Dec 13. The stock closed at $1.82 that day.

PrimePartners does not have such an optimistic view of the current or future value of SC Global's portfolio.

It noted that the developer's revenue had declined almost 40 per cent year-on-year in the first nine months of this year, largely due to slower sales.

"The general consensus of market reports indicates that the high-end residential property market in Singapore is expected to remain cautious with sales remaining tepid and prices stagnating or declining in the foreseeable future."

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[reporter2]

http://www.businesstimes.com.sg/prem...isers-20121227

Published December 27, 2012

Offer price for SC Global fair: independent advisers

Shareholders urged to accept bid or sell in open market if price is higher

By Mindy Tan


THE $1.80-per-share offer by chief executive and chairman Simon Cheong for shares in SC Global is "fair and reasonable", say the high-end residential property development company's independent financial advisers.

In a circular sent to shareholders yesterday, SC Global's independent directors said that they agreed with the advice, and recommended that shareholders accept the offer, or sell their shares in the open market if they can obtain a price higher than the offer price (after deducting related expenses).

Yesterday, SC Global's shares eased two cents to close at $1.925 before the circular was released.

Independent advisers PrimePartners Corporate Finance said that SC Global's revalued net asset value (RNAV) per share is $2.25 on an as-is valuation basis, and $2.16 on a gross development value basis, based on the estimated revaluation surpluses on unsold and/or uncompleted development properties.

In comparison with comparable precedent transactions, the price to revalued net asset value ratio (P/RNAV ratio) of the company of 0.80 times, as implied by the offer price, is also higher than the P/RNAV ratios of comparable companies with the exception of Guocoland's P/RNAV ratio of 0.81 times.

It is also worth noting that the company has a total net debt of approximately $1.39 billion as at Sept 30, resulting in a relatively high net debt-to-shareholders' equity ratio of 2.2 times, noted PrimePartners.

SC Global's management has indicated that it may, as and when appropriate, take steps to reduce debt gearing or fund the holding costs and expenses through various methods, including but not limited to reducing dividends and/or undertaking equity cash calls from shareholders.

PrimePartners added: "The group's high level of inventory holding and indebtedness means that a material portion of its expected cash flow may be required to be dedicated to the payment of interest on its indebtedness, operating costs of maintaining its inventory and payment of any relevant qualifying certificate-extension charges or penalties, thereby reducing the funds available to the group for use in its general business operations."

That being said, the offer price represents a discount of approximately 20.0 per cent to the RNAV per share of $2.25, noted the advisers.

"We note that the company has a substantial inventory of unsold units as well as development properties that have uncontracted units expected to be completed in future. Taking into account the outlook for the luxury residential sector in Singapore and the slow take-up rates of the company's inventories, the company may not be able to sell its inventories at the necessary premiums to realise profits in the near future," they said.

Shareholders who wish to accept the offer must do so by 5.30pm on Jan 16.

[kane]

analyst price target can change at any point. a real fair gauge is a premium of price over its current book value.