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NRA Capital Pte Ltd

Written by: Jacky Lee

Monday 14 Apr 2014

CapitaLand – Voluntary conditional cash offer for CapitaMalls Asia

Sucks, if you are holding CMA since IPO

CapitaLand offers $3bn to take over CapitaMalls Asia

Singapore, 14 April 2014 – Sound Investment Holdings Pte. Ltd., a wholly-owned subsidiary of CapitaLand Limited (CapitaLand), has launched a voluntary conditional cash offer (Offer) of approximately S$3.06 billion for CapitaMalls Asia Limited (CMA) with a view to delist CMA.

The Offer is for the remaining ordinary shares of CMA that CapitaLand does not already own and is conditional on receiving acceptances such that CapitaLand holds more than 90.0% of CMA. CapitaLand currently holds approximately 65.3% of CMA.

The Offer price is S$2.22 in cash for each CMA share. It represents a premium of 27.0% to the one-month volume-weighted average price (VWAP), and a premium of 20.7% to the net asset value per share of CMA and its subsidiaries (CMA Group) as at 31 December 2013. The Offer price will be reduced for any CMA dividend or distribution on or after the announcement date, including the currently proposed CMA final dividend of S$0.0175 per share for FY2013.

The Offer will be funded through a combination of internal cash resources and borrowings of CapitaLand and its subsidiaries (CapitaLand Group), excluding those of CMA Group.Here is a press statement from CapitaLand:

http://media.corporate-ir.net/media_files/IROL/13/130462/PressRelease.140414.pdf

Valuation:

CapitaMalls Asia owns 105 shopping malls valued at S$34.3 bn as of Dec. 31. CapitaLand believes the privatisation can fully integrate CMA significantly to enhance its competitive strengths in integrated developments, to simplify its organisation structure, increase its financial flexibility and scale and unlock shareholder value and achieve synergies. Temasek Holdings owns 39% of CapitaLand.

CMA was listed in November 2009 with offer price of S$2.12 per share, some comparison to its current data:-  

 

IPO

Current

 

FY2009

FY2013

Price

             S$2.12

             S$2.22

Market cap (S$bn)

               8.2

               8.6

Total Equity (S$bn)

               5.5

               7.3

Net income (S$m)

           388.1

           600.0

PER (x)

             21.2

             14.4

PBR (x)

               1.5

               1.2

 

Before IPO

 

Net debt (S$bn)

               2.9

               1.6

Net gearing (x)

             1.81

             0.22

Accumulated dividend (S$m)

 

           427.7

Accumulated net profit since IPO (S$m) – ex exceptional items

 

       2,609.7

Accumulated capex since IPO (S$m)

 

       1,528.8

Total fund raised (S$bn)

               2.5

-

Offer consideration (S$bn)

-

               3.1


Based on the data analysis, we view that CapitaLand has a good deal if it’s successful in taking over CMA at S$2.22. This offer works out to about 1.2x CMA’s book value as compared to 1.5x PBR at its lPO. On the whole, S$2.5bn fund raised in 2009 + accumulated net profit S$2.6bn – accumulated capex since IPO S$1.5bn – accumulated dividend  S$428m is almost equal to its S$3.1bn offer consideration. As at FY2013, CMA’s net gearing has significantly improved from 1.8x before IPO to 0.22x. We believe the move will be positive for CapitaLand.

Given the small premium to its IPO price and an average of only 1-2% dividend yield per year, IPO investors may want to reject the offer if they are still holding on to its shares. 

 


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