Perennial China Retail Trust

[Boon]

http://infopub.sgx.com/FileOpen/Pre_Cond...eID=288498

Page 12 and 13 of Appendix 1,

At completion of target asset acquisition and share consolidation, the "Vendors" will own about 99.27% of the enlarged share capital - a situation not in compliance with listing requirement - it is not mentioned in their rationale but it seems obvious - sure there are other means but it seems that they have opted for the VGO way.

(not vested)

I might miss it, but this is what I got from the document

"Following Closing, the Company shall issue and allot such number of new shares in the Company as may be required to fulfill the relevant shareholding and distribution requirement of the SGX-ST" - last para of page 13.

I found nothing on they have opted for the VGO way?

http://infopub.sgx.com/FileOpen/Unity_Su...eID=288960

Look at item 3 (Share Capital of the Company) - if one tracks and compute the changes in share capital with the corresponding number of shares to be issued at each steps, it appears that :

After 1,176,199,000 shares have been issued, majority of the shares (> 99%) would be still in the hands of the "Vendors"

After 1,306,285,000 shares have been issued (at 50.1% acceptance of PCRT offer) - about 10% of the issued shares would be free-float shares.

The figures depict only the VGO route - no other ways have been shown - right or wrong - this is how I read it.

(not vested)

[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?

For Publicly-Traded-Companies like PCRT, CMA and ARA,

MV = Market Value = Market Cap = Share Price x Number of Shares issued.

If CMA offers to take over PCRT with share swaps:

MV (CMA + PCRT) = MV (CMA) + MV (PCRT), assuming there is no net value creation or destruction from the merger. This is a simplest, reliable and powerful value measure - one could immediately work out the fair ratio of shares to be swapped.

As in the case of PREHL offers, such value measure could not be carried out, as market determined MV (PREHL- 1) does not exist.

(Note: PREHL-1 = PREHL with 27.93% of PCRT.)

All things being equal, I’d rather the “offeror” is a listed entity.

(not vested)

Hi Boon

Even though the market value (MV) of St James is not ascertainable due to the RTO transaction, the Offeror (PREH) did give the financials in terms of NTA post RTO for St James.

VB GG already did a rough calc based on NTA data given in the anncs.

So I guess the Offer is not well-received because of lack of marketability of Offer Shares. I guess mainly a perception of it as "St James clubbing" rather than 'PREH'.

I guess PCRT Offer is trading at no premium because dividend income investor segment seems to assume that PCRT will be delisted and they will be holding a bunch of St James. I think
this may be a wrong perception. PREH may want to keep PCRT as an 'ATM' for asset injection and collecting AUM fees. No point killing capital recycling 'ATM' that PREH spent time getting it IPO.
Ultimately, PREH wants listed REIT vehicleS for capital recycling. If PCRT is delisted and relisted, seems like LPPL.

Anyway the RTO and Offer will have a thick thick Offer docs like the FNN & FCL type. Will have plenty of info then.

[CityFarmer]

http://infopub.sgx.com/FileOpen/Pre_Cond...eID=288498

Page 12 and 13 of Appendix 1,

At completion of target asset acquisition and share consolidation, the "Vendors" will own about 99.27% of the enlarged share capital - a situation not in compliance with listing requirement - it is not mentioned in their rationale but it seems obvious - sure there are other means but it seems that they have opted for the VGO way.

(not vested)

I might miss it, but this is what I got from the document

"Following Closing, the Company shall issue and allot such number of new shares in the Company as may be required to fulfill the relevant shareholding and distribution requirement of the SGX-ST" - last para of page 13.

I found nothing on they have opted for the VGO way?

http://infopub.sgx.com/FileOpen/Unity_Su...eID=288960

Look at item 3 (Share Capital of the Company) - if one tracks and compute the changes in share capital with the corresponding number of shares to be issued at each steps, it appears that :

After 1,176,199,000 shares have been issued, majority of the shares (> 99%) would be still in the hands of the "Vendors"

After 1,306,285,000 shares have been issued (at 50.1% acceptance of PCRT offer) - about 10% of the issued shares would be free-float shares.

The figures depict only the VGO route - no other ways have been shown - right or wrong - this is how I read it.

(not vested)

The announcement is for the RTO proposal, and VGO is part of the proposal. Detail of VGO on shareholding in the document, is reasonable. It might not mean anything more than that, IMO.

[freedom]

As this is a non-cash takeover, nothing could have changed regarding to the market valuation of PCRT, thus it remains where it was regardless of whatever the "theoretical" takeover price. Given that most of PREH's asset are in development stage, the market probably should give a negative response to the takeover instead of a positive response. Essentially, it means that PCRT would probably use its cash flow to fund the large development of PREH. Little positive would be the fees PREH are getting from PCRT.

If the takeover is successful, probably, PREH's market valuation is determined by the share price of PCRT instead of PCRT's share price is determined by takeover by PREH(or St. James).

[opmi]

As this is a non-cash takeover, nothing could have changed regarding to the market valuation of PCRT, thus it remains where it was regardless of whatever the "theoretical" takeover price. Given that most of PREH's asset are in development stage, the market probably should give a negative response to the takeover instead of a positive response. Essentially, it means that PCRT would probably use its cash flow to fund the large development of PREH. Little positive would be the fees PREH are getting from PCRT.

If the takeover is successful, probably, PREH's market valuation is determined by the share price of PCRT instead of PCRT's share price is determined by takeover by PREH(or St. James).

Post RTO, the market price is determined by the valuation of PREH with or without full privatised PCRT.

[MINX]

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

For Publicly-Traded-Companies like PCRT, CMA and ARA,

MV = Market Value = Market Cap = Share Price x Number of Shares issued.

If CMA offers to take over PCRT with share swaps:

MV (CMA + PCRT) = MV (CMA) + MV (PCRT), assuming there is no net value creation or destruction from the merger. This is a simplest, reliable and powerful value measure - one could immediately work out the fair ratio of shares to be swapped.

As in the case of PREHL offers, such value measure could not be carried out, as market determined MV (PREHL- 1) does not exist.

(Note: PREHL-1 = PREHL with 27.93% of PCRT.)

All things being equal, I’d rather the “offeror” is a listed entity.

(not vested)

Hi Boon

Even though the market value (MV) of St James is not ascertainable due to the RTO transaction, the Offeror (PREH) did give the financials in terms of NTA post RTO for St James.

VB GG already did a rough calc based on NTA data given in the anncs.

So I guess the Offer is not well-received because of lack of marketability of Offer Shares. I guess mainly a perception of it as "St James clubbing" rather than 'PREH'.

I guess PCRT Offer is trading at no premium because dividend income investor segment seems to assume that PCRT will be delisted and they will be holding a bunch of St James. I think
this may be a wrong perception. PREH may want to keep PCRT as an 'ATM' for asset injection and collecting AUM fees. No point killing capital recycling 'ATM' that PREH spent time getting it IPO.
Ultimately, PREH wants listed REIT vehicleS for capital recycling. If PCRT is delisted and relisted, seems like LPPL.

Anyway the RTO and Offer will have a thick thick Offer docs like the FNN & FCL type. Will have plenty of info then.

You make a good point about them keeping PCRT as an ATM, that explain their nonchalant approach with regard the remaining shares of PCRT.

[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?

For Publicly-Traded-Companies like PCRT, CMA and ARA,

MV = Market Value = Market Cap = Share Price x Number of Shares issued.

If CMA offers to take over PCRT with share swaps:

MV (CMA + PCRT) = MV (CMA) + MV (PCRT), assuming there is no net value creation or destruction from the merger. This is a simplest, reliable and powerful value measure - one could immediately work out the fair ratio of shares to be swapped.

As in the case of PREHL offers, such value measure could not be carried out, as market determined MV (PREHL- 1) does not exist.

(Note: PREHL-1 = PREHL with 27.93% of PCRT.)

All things being equal, I’d rather the “offeror” is a listed entity.

(not vested)

Hi Boon

Even though the market value (MV) of St James is not ascertainable due to the RTO transaction, the Offeror (PREH) did give the financials in terms of NTA post RTO for St James.

VB GG already did a rough calc based on NTA data given in the anncs.

So I guess the Offer is not well-received because of lack of marketability of Offer Shares. I guess mainly a perception of it as "St James clubbing" rather than 'PREH'.

I guess PCRT Offer is trading at no premium because dividend income investor segment seems to assume that PCRT will be delisted and they will be holding a bunch of St James. I think
this may be a wrong perception. PREH may want to keep PCRT as an 'ATM' for asset injection and collecting AUM fees. No point killing capital recycling 'ATM' that PREH spent time getting it IPO.
Ultimately, PREH wants listed REIT vehicleS for capital recycling. If PCRT is delisted and relisted, seems like LPPL.

Anyway the RTO and Offer will have a thick thick Offer docs like the FNN & FCL type. Will have plenty of info then.

You make a good point about them keeping PCRT as an ATM, that explain their nonchalant approach with regard the remaining shares of PCRT.

Extending the 'keep ATM' idea a bit further, thats mean PREH will keep PCRT DPU constant or increasing for future asset injections. It is really dumb to 养/rear PCRT for 3 years by giving regular DPU and corp transparency (the usual REIT modus operandi) , then kill it without injecting some assets.

[AlphaQuant]

If i remember correctly, when Pua initiated the idea of PCRT, he said that the focus of the trust should be on a combination of DPU+NAV growth, and not on yield only.

This is understandable - afterall, his gameplan is to go in cheap at the developmental phases rather than to acquire matured malls when they are expensive - higher risks, higher returns. The latter is also more difficult since the Chinese G tend to regard these transactions as speculation.

So far, 3yrs in, we see that Pua has delivered in the NAV growth part since the properties have been revalued upwards consistently; however, the DPU has so far been sustained only thru the earn out deeds and not genuine NPI due to low occupancies. The share price has thus been dropping due to concerns of sustainability of the DPU.

So i think his conclusion is that the trust is the wrong instrument in the wrong market to market his vision. What the Sg market wants from a trust is just DPU based on NPI (real cash), with a distrust of NAV growth (i.e. paper valuations).

So given that investors in the trust do not understand his vision, hence making it useless in recycling capital via equity, it's better to just package his idea into a proper company to tap the capital markets without the pressure of delivering unsustainably high DPU. There's probably more than coincidence that the offer price is at 70c (i.e. IPO price) - it's probably goodwill for the blokes who subscribed at IPO to hop over to his new vehicle to continue his vision.

[Nick]

I am just curious - is it usual to value 'properties under development' on a 'fully completed, fully leased' basis ? Could this explain why it has historically traded below NAV ?

(Not Vested)

[opmi]

If i remember correctly, when Pua initiated the idea of PCRT, he said that the focus of the trust should be on a combination of DPU+NAV growth, and not on yield only.

This is understandable - afterall, his gameplan is to go in cheap at the developmental phases rather than to acquire matured malls when they are expensive - higher risks, higher returns. The latter is also more difficult since the Chinese G tend to regard these transactions as speculation.

So far, 3yrs in, we see that Pua has delivered in the NAV growth part since the properties have been revalued upwards consistently; however, the DPU has so far been sustained only thru the earn out deeds and not genuine NPI due to low occupancies. The share price has thus been dropping due to concerns of sustainability of the DPU.

So i think his conclusion is that the trust is the wrong instrument in the wrong market to market his vision. What the Sg market wants from a trust is just DPU based on NPI (real cash), with a distrust of NAV growth (i.e. paper valuations).

So given that investors in the trust do not understand his vision, hence making it useless in recycling capital via equity, it's better to just package his idea into a proper company to tap the capital markets without the pressure of delivering unsustainably high DPU. There's probably more than coincidence that the offer price is at 70c (i.e. IPO price) - it's probably goodwill for the blokes who subscribed at IPO to hop over to his new vehicle to continue his vision.

Hi AlphaQuant

Question on Earn-Out Financial Engr:

What is the % of DPU from Earn-Out and NPI respectively? Cannot seem to get it from the latest FY ppt.

This Earn-Out Financial Engr reminds me of Hyflux Water Trust type or EPC/Off-take of Water Treatment Plants under construction.