Saizen REIT

[d.o.g.]

8. Operating cost for liquidation: 333

Since the company is essentially pure cash, I assume the longest required for liquidation is 3 months, of which the manager's cost recovery for month of February was 111 so multiplied by 3.

Total cash payout of liquidation: 11,756k SGD

Total units: 287,024,902

Liquidation value per share: 4.1c per share

1. Cash Burn

Besides "Manager Cost Recovery" there is also the matter of "Admin & Misc Expenses". For the 4 months where detailed data was given, the median monthly amounts were $129k and $33k, for a total of $162k.

2. Timeframe

Three months may be optimistic. Back in 2012, LMA sold its business for cash and also liquidated. From the day the stock went ex-dividend (31 Oct 2012) until the final payment (13 May 2013), over 6 months passed.

3. Proceeds

Assuming that the cash burn estimate from #1 is accurate, the liquidation proceeds depend on how many months are needed to finish the process:

3 months: 3.86 cents per share
6 months: 3.69 cents per share
9 months: 3.52 cents per share

===
Obviously, the longer the time needed, the lower the absolute return, and also the worse the IRR.

Of course, YMMV.

[slowandsteady]

[quote='slowandsteady' pid='138460' dateline='1491186813']
3 months: 3.86 cents per share
6 months: 3.69 cents per share
9 months: 3.52 cents per share

Thanks d.o.g. for pointing out the additional Admin & Misc Expenses. Would rerun my calculations but the impact shouldn't be large.

Going straight by your numbers, I guess there's no down side as long as the liquidation is completed in 9 months (pay out can happen later that's ok, as long as management stops getting paid lol). Anything quicker means profit, with very minimal risk. Potential random events may happen too, like being approached for an RTO. In fact, the compensation by Sime Darby is a random event, with Saizen REIT trading at 2.6-2.8c last week (around 10% below NAV, without taking into account liquidation expenses). Those who invested then based on the same "nothing to lose" logic would be sitting on very sizable gains by now.

[cif5000]

I did a liquidation arbitrage on BrightOrient (also a cash shell) back in 2012. The stock traded until Dec 2012, and I got my money only in Oct 2013 (10.5 months wait).

The XIRR of ~30% wasn't that bad right?

I think the main difference is that BOHL had been shopping around for an RTO target whereas Saizen was intended to be liquidated after the claim expired. SD came in during the interim period and paid for the RTO process which did not materialize. 

The extra $3m payment IMO is the main risk now. We will see in the next monthly valuation report. It could be the cause for any delay.

BOHL took about 3+ months to issue the notice of SGM from the date they announced the winding up. Slowandsteady is right that the cash burn will end as soon as the SGM is concluded and the appointment of liquidator to start the liquidation process. They burned for about 4 months. I don't expect Saizen to burn cash longer than that.

Liquidation itself will take at least another 3 months but the cost for the liquidator would have already been predetermined. If all goes well, the capital can complete a round trip by Christmas.

[slowandsteady]

The extra $3m payment IMO is the main risk now. We will see in the next monthly valuation report. It could be the cause for any delay.

Yes good point. I actually sent an email to the IR on Monday querying them about this and the time frame in general, but only got those generic "yes we understand unit holders concerns, will update as soon as there is material info.. etc. etc.."

But likely that they can start liquidation process and SD shouldn't take too long to pay.

[yawnyawn]

On liquidation value:

The guidance of 2.37c was from last year, when the RTO was still in the works, and thus included costs for completing the RTO, before the remaining cash was returned to unit holders. The scenario now is Sime Darby returning the costs incurred, and paying an extra compensation on top of that.

From the current cash value of 4.1c per share to 3.5c last traded, it is a huge $1,722,000 assumed for the liquidation expenses. For comparison, the Bright Orient liquidation you mentioned spent around $350,000 for liquidation. If you add in the $333,000 I already budgeted in for expenses, that's over $2 million to liquidate a shell that's over 98% cash - a scenario I would deem unlikely.

On timeline:

The Bright Orient liquidation involved RMB and moving money out of China/HK, which generally requires more time. Saizen REIT should thus be faster, at least I hope so.

Anyway the key thing for me is that my downside is protected. It's a very unsexy way to invest, but I've learnt that if you don't (or make it very unlikely to) lose money, then good things may happen to you. So I'm happy with this, worst case I get a low IRR, best case I get a decent IRR

http://infopub.sgx.com/FileOpen/20170412...eID=447998

Estimated total cash at dissolution $0.03406/unit

Estimated expenses up to end August - $1.57M

[lonewolf]

Looks like the final amount of the cash per units following termination has been determined: $0.03378

Details here >> WINDING-UP PROCEEDINGS  

That's quite some way of slowandsteady estimate of 4.1c and below the 3.5c that was trading when he announced his liquidation arbitrage.

[zoolander123]

Typo?


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[lonewolf]

Typo?

Yup. Corrected. Thanks!

[lonewolf]

The final distribution has been determined to be 3.40983 Singapore cents per unit. A bit higher than the earlier estimate of 3.378c.

It will be paid on 2 Oct and Saizen will be dlisted on 6 Oct.

Details:  (I) NOTICE OF BOOKS CLOSURE AND FINAL DISTRIBUTION PAYMENT DATE (II) DELISTING AND TERMINATION DATE