Perennial China Retail Trust

[Boon]

Here are my takes

St James = a SGX listed Company (Catalist) with entertainment business.

PREH = a private company in real estate business with real estate assets in Singapore and China

“Vendors” = PREH + certain other persons >> owns 26.11% of PCRT

Act 1 = Restructuring of St. James = “divestment” of entertainment business + “injection” of “Vendors” assets (through share swaps) into St. James (inclusive of 26.11% of PCRT)

The “transformed St. James” would be renamed “PREHL” and to be moved from “catalist” to the Main Board of SGX

Act 2 = VGO of remaining units of PCRT

Act 1 would set as a Pre-Condition for Act 2

To me, the traditional classic RTO is Act 1 – “takeover” of “St. James” (a listed entity) by the “Vendors” (PREH，a private company + private investors).

Act 2 is a normal takeover (also through share swaps) .

If Act 2 is unsuccessful, PCRT will remain as it is - as a listed Business Trust.

IMO, to the "Vendors". the significance and importance of the deals is in Act 1.

(not vested)

Thanks for explaining things in simple understandable terms.
Putting yourself in the shoes of PCRT's minority shareholders, do you view this as a ok or raw deal? From what I can figure out from their "not-so'easy-to-understand" announcement, my concerns are:
1) The offer price of 70c is not sweet enough, it is below NAV(74c). Granted 2 of their malls are still under development, one opening next month, however these malls are served by excellent transport links & have potential to generate good income.
2) The offer is not in cash but a share swap with no plan B for those not for the proposal. Is the new entity share price over inflated which makes it a lose-lose situation for minority shareholders?
3) The china malls are being taken over at 25% discount to their valuation, this on top of the already discounted offer price of 70c, head thet win, tail you lose dilemma?
4) The new entity will venture into Myanmar, a new frontier market, read high risk venture?
Would be nice to hear your views?

Earlier on, I mentioned that – “IMO, to the "Vendors", the significance and importance of the deals is in Act 1.”

On closer scrutiny, Act 2 is just as equally and critically important.

On completion of Act 1, the “Vendors” would have owned more than 99% of PREHL – a situation in which there is insufficient shareholders spread to maintain its listing status – therefore, the rationale for Act 2 is obvious – to increase shareholders spread or shareholders base to meet listing requirement.

Question:
Is this a “raw deal” to the minority/non-controlling unit-holders of PCRT?

IMO, it is a “raw deal” for
1) “Disclosure issues”- “lack of disclosure and standard of disclosure”.
2) Due to 1), minority unit-holders of PCRT could not carried out “proper due diligence” including pricing of the VGO consideration.

Act 1 is essentially “back-door-listing”.

Imagine, if the “Vendors” were to come in through the “front-door” – by IPO, it would at least have to come up with an “IPO prospectus”, which essentially contains “MUCH-MORE” information on the “would-be-transformed” new entity – PREHL.

PCRT has gone through the front-door and has been listed for slightly less than 3 years now. There are information available on PCRT, but which are not available on PREHL that IMO, are essential for investors to value PREHL (including pricing of the risks) correctly.

These information include but not limited to the following fews :
a) What are the land tenure of properties in PRC and Singapore? (Information on PCRT properties available)
b) What are the holding structures for ownerships of PRC properties? Through “intermediate offshore holding companies”? Are there differences between PRC assets of PCRT and PREHL – have tax implications on dividend repatriations and asset disposal.
c) How are values of debt, equity, enterprise value in PREHL being measured, compared to PCRT? (there are many valuation matrix/methods to value a company – at least all relevant data should be made available to investors)
d) The list could go on.

In essence, a lack of easily and readily accessible information on back door listings compared with IPOs could make analysis on them challenging.

To many, backdoor listings are effectively a marriage of convenience. In effect, new entity has been created in the process. Some critics argue that the rules should broadly be the same, regardless of if the company uses the market’s front or back door – for those that chooses to come through the back door, they would have to re-comply with exchange admission requirements – which I strongly agreed (but not a re-compliance that is equivalent to a full IPO-compliance)

As in the case of PREHL, the standard of disclosure would have to be such that investors should have enough information to value the company (including pricing of its risks) correctly – this is my “minimum re-compliance” requirement for back door listing.

In short, I have not "enough" information to value (including pricing of its risks) PREHL correctly.

(not vested)

[opmi]

To add,

"therefore, the rationale for Act 2 is obvious – to increase shareholders spread or shareholders base to meet listing requirement."

the usual practice of COmpliance Placement would have solve the problem. No need to do Offer for PCRT.

[MINX]

Here are my takes

St James = a SGX listed Company (Catalist) with entertainment business.

PREH = a private company in real estate business with real estate assets in Singapore and China

“Vendors” = PREH + certain other persons >> owns 26.11% of PCRT

Act 1 = Restructuring of St. James = “divestment” of entertainment business + “injection” of “Vendors” assets (through share swaps) into St. James (inclusive of 26.11% of PCRT)

The “transformed St. James” would be renamed “PREHL” and to be moved from “catalist” to the Main Board of SGX

Act 2 = VGO of remaining units of PCRT

Act 1 would set as a Pre-Condition for Act 2

To me, the traditional classic RTO is Act 1 – “takeover” of “St. James” (a listed entity) by the “Vendors” (PREH，a private company + private investors).

Act 2 is a normal takeover (also through share swaps) .

If Act 2 is unsuccessful, PCRT will remain as it is - as a listed Business Trust.

IMO, to the "Vendors". the significance and importance of the deals is in Act 1.

(not vested)

Thanks for explaining things in simple understandable terms.
Putting yourself in the shoes of PCRT's minority shareholders, do you view this as a ok or raw deal? From what I can figure out from their "not-so'easy-to-understand" announcement, my concerns are:
1) The offer price of 70c is not sweet enough, it is below NAV(74c). Granted 2 of their malls are still under development, one opening next month, however these malls are served by excellent transport links & have potential to generate good income.
2) The offer is not in cash but a share swap with no plan B for those not for the proposal. Is the new entity share price over inflated which makes it a lose-lose situation for minority shareholders?
3) The china malls are being taken over at 25% discount to their valuation, this on top of the already discounted offer price of 70c, head thet win, tail you lose dilemma?
4) The new entity will venture into Myanmar, a new frontier market, read high risk venture?
Would be nice to hear your views?

Earlier on, I mentioned that – “IMO, to the "Vendors", the significance and importance of the deals is in Act 1.”

On closer scrutiny, Act 2 is just as equally and critically important.

On completion of Act 1, the “Vendors” would have owned more than 99% of PREHL – a situation in which there is insufficient shareholders spread to maintain its listing status – therefore, the rationale for Act 2 is obvious – to increase shareholders spread or shareholders base to meet listing requirement.

Question:
Is this a “raw deal” to the minority/non-controlling unit-holders of PCRT?

IMO, it is a “raw deal” for
1) “Disclosure issues”- “lack of disclosure and standard of disclosure”.
2) Due to 1), minority unit-holders of PCRT could not carried out “proper due diligence” including pricing of the VGO consideration.

Act 1 is essentially “back-door-listing”.

Imagine, if the “Vendors” were to come in through the “front-door” – by IPO, it would at least have to come up with an “IPO prospectus”, which essentially contains “MUCH-MORE” information on the “would-be-transformed” new entity – PREHL.

PCRT has gone through the front-door and has been listed for slightly less than 3 years now. There are information available on PCRT, but which are not available on PREHL that IMO, are essential for investors to value PREHL (including pricing of the risks) correctly.

These information include but not limited to the following fews :
a) What are the land tenure of properties in PRC and Singapore? (Information on PCRT properties available)
b) What are the holding structures for ownerships of PRC properties? Through “intermediate offshore holding companies”? Are there differences between PRC assets of PCRT and PREHL – have tax implications on dividend repatriations and asset disposal.
c) How are values of debt, equity, enterprise value in PREHL being measured, compared to PCRT? (there are many valuation matrix/methods to value a company – at least all relevant data should be made available to investors)
d) The list could go on.

In essence, a lack of easily and readily accessible information on back door listings compared with IPOs could make analysis on them challenging.

To many, backdoor listings are effectively a marriage of convenience. In effect, new entity has been created in the process. Some critics argue that the rules should broadly be the same, regardless of if the company uses the market’s front or back door – for those that chooses to come through the back door, they would have to re-comply with exchange admission requirements – which I strongly agreed (but not a re-compliance that is equivalent to a full IPO-compliance)

As in the case of PREHL, the standard of disclosure would have to be such that investors should have enough information to value the company (including pricing of its risks) correctly – this is my “minimum re-compliance” requirement for back door listing.

In short, I have not "enough" information to value (including pricing of its risks) PREHL correctly.

(not vested)

Thanks for sharing your views. Although PCRT could bulldoze it's way and go through with the deal, never mind the feelings of minority shareholders, nevertheless some effort on the part of the management to explain the plus & minuses in simple terms to minority shareholders would go a long way to ensure they get continued support, rather than a bad after taste.

[opmi]

Hypothetical Question: If CapitaMall Asia (CMA) or ARA did an offer for PCRT using CMA shares but no cash, will PCRT minorities be happy?

[gutman]

The presentation material published by St James does provide some explanation.

http://infopub.sgx.com/FileOpen/Presenta...eID=288503

Slide 5 gives an overview of how the new company will be organised. The new company allows Phua Sek Guan to put all his other assets into a listed company. It is indeed a backdoor listing as mentioned by Boon.

[cfa]

I own 120,000 shares , please help to advise how many shares will I be end up with the newco share , if I choose to accept the swap ? Thanks.

[greengiraffe]

I own 120,000 shares , please help to advise how many shares will I be end up with the newco share , if I choose to accept the swap ? Thanks.

120000 X 0.5242 = 62904 newco

[MINX]

I own 120,000 shares , please help to advise how many shares will I be end up with the newco share , if I choose to accept the swap ? Thanks.

120000 X 0.5242 = 62904 newco

Does anyone know what is the gearing for the new entity?
Any views on the Singapore's properties( specifically ability to generate good NPI) , namely Chijmes, Capitol devt, House of Tan Yeok Nee & Triple One Somerset. With the exception of the last property, the first 3 are all conservation properties, thus their development potential is curtailed.

[greengiraffe]

I own 120,000 shares , please help to advise how many shares will I be end up with the newco share , if I choose to accept the swap ? Thanks.

120000 X 0.5242 = 62904 newco

Does anyone know what is the gearing for the new entity?
Any views on the Singapore's properties( specifically ability to generate good NPI) , namely Chijmes, Capitol devt, House of Tan Yeok Nee & Triple One Somerset. With the exception of the last property, the first 3 are all conservation properties, thus their development potential is curtailed.

http://infopub.sgx.com/Apps?A=COW_Corpor...ePrice.pdf

Under 1.4 - 0.51x

Under 2.5 - 0.67x (50.1% PCRT), 0.56x (100% PCRT)

Based on presentation slides released 14 Mar 14, assets are injected into newco @ 25% discount.

[cfa]

I own 120,000 shares , please help to advise how many shares will I be end up with the newco share , if I choose to accept the swap ? Thanks.

120000 X 0.5242 = 62904 newco

Hello g.g. ,
Many thanks.