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30-01-2015, 09:22 AM
KepLand shares surge on takeover bid
Melissa Tan
The Straits Times
Thursday, Jan 29, 2015
Shares of property developer Keppel Land surged yesterday after a takeover bid from its parent Keppel Corp was announced last Friday.
KepLand shot up by 25 per cent, or 90 cents, to $4.55, its highest since April 2011. It was one of the most traded stocks on the local bourse, with 43.9 million shares changing hands.
Conglomerate KepCorp rose as well, up six cents to $8.16 on 25.4 million shares traded.
Both stocks resumed trading yesterday after calling a halt last Wednesday morning.
Analysts said yesterday that KepLand shareholders should accept the buyout offer,which could cost KepCorp around $3.2 billion.
KepCorp is offering a two-tier price for the KepLand shares it does not already own: A base one of $4.38 apiece, and $4.60 if its buyout succeeds. This higher price values KepLand at around $7.1 billion.
This offer price includes KepLand's proposed 14-cent dividend for the financial year that ended on Dec 31.
Subtracting the dividend, the higher bid would go down to $4.46, which is 22 per cent over KepLand's close at $3.65 last Tuesday.
"With the near-term softness in the property market, the premium is pretty attractive to Keppel Land shareholders," said Phillip Securities analyst Benjamin Ong.
OCBC Investment Research analyst Eli Lee added in a report yesterday: "Given currently uncertain outlooks for KepLand's core development businesses in Singapore and China, we believe this is a fair enough offer and allows minority shareholders to exit at a share price above the last 36-month high."
However, analysts were slightly more cautious on how the takeover would affect KepCorp, which owns about 54.6 per cent of mainboard-listed KepLand.
KepCorp is paying a hefty price to take KepLand private, but the benefits of the move may not be immediately obvious, they said, adding that the uncertainty could affect its share price in the near future.
"Given the rich price offered for KepLand and that synergies for the combination may not be immediately apparent, there may be some near-term weakness in KepCorp's share price," OCBC Investment Research said in a note yesterday.
"We incorporate a higher conglomerate discount of 10 per cent (from 5 per cent previously) for the privatisation of KepLand... our fair value estimate (for KepCorp) drops from $9.89 to $9.14."
The value of a diversified company may often be weighed down by a so-called "conglomerate discount" on the sum of its parts.
Maybank Kim Eng also said in a report that although the soft property market may make it cheaper to privatise KepLand, "it also works against crystallising value in the near term".
"While KepCorp has hinted that making further attractive property investments may be easier with a fully controlled KepLand and lower capital costs, no concrete plans were communicated," it said. Its target price for KepCorp is $8.60.
However, analysts said KepCorp still had potential to rise in the longer term.
KepCorp chief executive Loh Chin Hua told a briefing last Friday that the conglomerate has made major moves in the past that the market "did not fully appreciate" at the time.
One example he cited was the development of the site of its old shipyard at Keppel Bay into private condominiums.
It had to pay a development charge of about $1 billion to convert the site to residential use, but the properties there are now a source of good returns, he said.
"Even now, every unit we sell in Keppel Bay goes straight to our bottom line because costs are quite low," he said.
This article was first published on January 27, 2015.
http://business.asiaone.com/news/kepland...keover-bid
Melissa Tan
The Straits Times
Thursday, Jan 29, 2015
Shares of property developer Keppel Land surged yesterday after a takeover bid from its parent Keppel Corp was announced last Friday.
KepLand shot up by 25 per cent, or 90 cents, to $4.55, its highest since April 2011. It was one of the most traded stocks on the local bourse, with 43.9 million shares changing hands.
Conglomerate KepCorp rose as well, up six cents to $8.16 on 25.4 million shares traded.
Both stocks resumed trading yesterday after calling a halt last Wednesday morning.
Analysts said yesterday that KepLand shareholders should accept the buyout offer,which could cost KepCorp around $3.2 billion.
KepCorp is offering a two-tier price for the KepLand shares it does not already own: A base one of $4.38 apiece, and $4.60 if its buyout succeeds. This higher price values KepLand at around $7.1 billion.
This offer price includes KepLand's proposed 14-cent dividend for the financial year that ended on Dec 31.
Subtracting the dividend, the higher bid would go down to $4.46, which is 22 per cent over KepLand's close at $3.65 last Tuesday.
"With the near-term softness in the property market, the premium is pretty attractive to Keppel Land shareholders," said Phillip Securities analyst Benjamin Ong.
OCBC Investment Research analyst Eli Lee added in a report yesterday: "Given currently uncertain outlooks for KepLand's core development businesses in Singapore and China, we believe this is a fair enough offer and allows minority shareholders to exit at a share price above the last 36-month high."
However, analysts were slightly more cautious on how the takeover would affect KepCorp, which owns about 54.6 per cent of mainboard-listed KepLand.
KepCorp is paying a hefty price to take KepLand private, but the benefits of the move may not be immediately obvious, they said, adding that the uncertainty could affect its share price in the near future.
"Given the rich price offered for KepLand and that synergies for the combination may not be immediately apparent, there may be some near-term weakness in KepCorp's share price," OCBC Investment Research said in a note yesterday.
"We incorporate a higher conglomerate discount of 10 per cent (from 5 per cent previously) for the privatisation of KepLand... our fair value estimate (for KepCorp) drops from $9.89 to $9.14."
The value of a diversified company may often be weighed down by a so-called "conglomerate discount" on the sum of its parts.
Maybank Kim Eng also said in a report that although the soft property market may make it cheaper to privatise KepLand, "it also works against crystallising value in the near term".
"While KepCorp has hinted that making further attractive property investments may be easier with a fully controlled KepLand and lower capital costs, no concrete plans were communicated," it said. Its target price for KepCorp is $8.60.
However, analysts said KepCorp still had potential to rise in the longer term.
KepCorp chief executive Loh Chin Hua told a briefing last Friday that the conglomerate has made major moves in the past that the market "did not fully appreciate" at the time.
One example he cited was the development of the site of its old shipyard at Keppel Bay into private condominiums.
It had to pay a development charge of about $1 billion to convert the site to residential use, but the properties there are now a source of good returns, he said.
"Even now, every unit we sell in Keppel Bay goes straight to our bottom line because costs are quite low," he said.
This article was first published on January 27, 2015.
http://business.asiaone.com/news/kepland...keover-bid
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
