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19-04-2014, 09:45 AM
Property stocks rally after takeover bids
Index that includes big guns of industry up 5.6%
Published on Apr 19, 2014 1:10 AM
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HPL owns land currently occupied by hotels such as the Hilton Singapore. Earlier this week, its shareholders received an offer for their shares at $3.50 apiece. -- PHOTO: HOTEL PROPERTIES
By Jonathan Kwok
SINGAPORE-LISTED property developers have rallied after takeover offers were unveiled for two big companies in the sector.
The FTSE ST Real Estate Holding and Development Index, an 18-member gauge that includes big names like CapitaLand, City Developments, Keppel Land and UOL Group, gained 5.6 per cent this week.
This caps its rise over the past few weeks, bringing the index up 11.9 per cent from its recent low on March 20.
The index's upward trend gathered momentum this week due to the two takeover bids.
On Monday, CapitaLand caught investors by surprise when it unveiled a cash offer for CapitaMalls Asia, its 65.3 per cent-owned mall subsidiary.
South-east Asia's largest developer offered $2.22 per share - a 23 per cent premium over the pre-offer price - to take CapitaMalls Asia private.
Both CapitaLand and CapitaMalls Asia are part of the 30-member Straits Times Index, which tracks the largest counters listed here.
And on Tuesday morning, shareholders of Hotel Properties (HPL) received an offer for their shares at $3.50 apiece.
The offerors are HPL's controlling shareholder Ong Beng Seng, Wheelock Properties and Mr David Ban, another HPL shareholder.
Analysts say while these two takeover bids could give a boost to property counters, the cheer may be short-lived.
"(The) two property-related privatisation offers announced may also lift valuations of property-related stocks which have been sold down in recent months, but this could be temporary as news within the sector remains grim," said NetResearch Asia in a note this week.
The offers this week come on the heels of another takeover bid for a property company this year. In February, United Industrial Corporation (UIC) offered to buy out its unit Singapore Land.
UIC, linked to banking tycoon Wee Cho Yaw, is offering $9.40 per share in the property developer and office landlord. It plans to delist SingLand from the Singapore Exchange if its offer succeeds.
The recent bounce in property stocks is a turnaround for the sector, which has been languishing for a year.
"Due to a deteriorating housing outlook, property developers have underperformed the general market over the last twelve months," said OCBC Investment Research analyst Eli Lee, who covers property stocks.
"During this period, the FTSE ST Real Estate Holding and Development Index declined 4.5 per cent versus a 1.1 per cent dip for the Straits Times Index."
Mr Lee noted that excessive pessimism has been priced into property developers during this period, particularly when the share prices for several big names fell to 40 per cent to 50 per cent below their revalued net asset values (RNAV) in the first quarter.
The RNAV is a gauge of the value of the assets in a company.
Investors had kept away from developer stocks given the "limited visibility, over the near term, for positive catalysts", Mr Lee said.
A "positive catalyst" in financial circles refers to a reason for investors to lift the valuation of a certain stock. "The recent set of privatisation offers provided just that, which sparked off a wave of price increases in the sector," added Mr Lee.
Brokers say that the offers from corporate giants like CapitaLand, Wheelock and UIC have enthused retail investors, who see them as a sign of confidence in the property sector.
"The big guys are telling you that property stocks are cheap and they don't mind buying a lot of shares," said remisier Gary Goh.
Investors are also taking bets that other property firms may be taken private by their parent companies, who could be tempted to take advantage of the current low valuations.
Cash offers normally come with a premium to the last traded price so punters can profit from the delistings theme if they guess correctly the identity of the next takeover target.
"Rumours are flying around of other potential offers," said Mr Goh. "(Companies) in the spotlight are those trading at a substantial discount to RNAV."
The still-low interest rate environment is making it easier to launch a takeover offer, Mr Goh added.
This is because companies or wealthy individuals who want to privatise a listed firm will be able to borrow money cheaply to finance the offers.
Names that are being thrown around include Wheelock Properties, which is itself involved in the proposed takeover of Hotel Properties. CIMB Research said this week that Wheelock remains a prime privatisation candidate in the longer term given its attractive valuation, strong balance sheet, low trading liquidity and the fact that there is one major shareholder.
Among stocks on the FTSE ST Real Estate Holding and Development Index, the best performer over the past month is CapitaMalls Asia, boosted by CapitaLand's offer. It is up 30 per cent from March 20 - the recent low of the index. CapitaMalls Asia closed on Thursday at $2.19, a gain of 21.3 per cent this week.
Developer Oxley Holdings has also done well, as has Centurion Corporation, which develops and manages dormitories.
Meanwhile, CapitaLand has gained on hopes that it will benefit from the lucrative retail mall segment, especially in China, if it manages to privatise CapitaMalls Asia.
jonkwok@sph.com.sg
Index that includes big guns of industry up 5.6%
Published on Apr 19, 2014 1:10 AM
PRINT EMAIL
HPL owns land currently occupied by hotels such as the Hilton Singapore. Earlier this week, its shareholders received an offer for their shares at $3.50 apiece. -- PHOTO: HOTEL PROPERTIES
By Jonathan Kwok
SINGAPORE-LISTED property developers have rallied after takeover offers were unveiled for two big companies in the sector.
The FTSE ST Real Estate Holding and Development Index, an 18-member gauge that includes big names like CapitaLand, City Developments, Keppel Land and UOL Group, gained 5.6 per cent this week.
This caps its rise over the past few weeks, bringing the index up 11.9 per cent from its recent low on March 20.
The index's upward trend gathered momentum this week due to the two takeover bids.
On Monday, CapitaLand caught investors by surprise when it unveiled a cash offer for CapitaMalls Asia, its 65.3 per cent-owned mall subsidiary.
South-east Asia's largest developer offered $2.22 per share - a 23 per cent premium over the pre-offer price - to take CapitaMalls Asia private.
Both CapitaLand and CapitaMalls Asia are part of the 30-member Straits Times Index, which tracks the largest counters listed here.
And on Tuesday morning, shareholders of Hotel Properties (HPL) received an offer for their shares at $3.50 apiece.
The offerors are HPL's controlling shareholder Ong Beng Seng, Wheelock Properties and Mr David Ban, another HPL shareholder.
Analysts say while these two takeover bids could give a boost to property counters, the cheer may be short-lived.
"(The) two property-related privatisation offers announced may also lift valuations of property-related stocks which have been sold down in recent months, but this could be temporary as news within the sector remains grim," said NetResearch Asia in a note this week.
The offers this week come on the heels of another takeover bid for a property company this year. In February, United Industrial Corporation (UIC) offered to buy out its unit Singapore Land.
UIC, linked to banking tycoon Wee Cho Yaw, is offering $9.40 per share in the property developer and office landlord. It plans to delist SingLand from the Singapore Exchange if its offer succeeds.
The recent bounce in property stocks is a turnaround for the sector, which has been languishing for a year.
"Due to a deteriorating housing outlook, property developers have underperformed the general market over the last twelve months," said OCBC Investment Research analyst Eli Lee, who covers property stocks.
"During this period, the FTSE ST Real Estate Holding and Development Index declined 4.5 per cent versus a 1.1 per cent dip for the Straits Times Index."
Mr Lee noted that excessive pessimism has been priced into property developers during this period, particularly when the share prices for several big names fell to 40 per cent to 50 per cent below their revalued net asset values (RNAV) in the first quarter.
The RNAV is a gauge of the value of the assets in a company.
Investors had kept away from developer stocks given the "limited visibility, over the near term, for positive catalysts", Mr Lee said.
A "positive catalyst" in financial circles refers to a reason for investors to lift the valuation of a certain stock. "The recent set of privatisation offers provided just that, which sparked off a wave of price increases in the sector," added Mr Lee.
Brokers say that the offers from corporate giants like CapitaLand, Wheelock and UIC have enthused retail investors, who see them as a sign of confidence in the property sector.
"The big guys are telling you that property stocks are cheap and they don't mind buying a lot of shares," said remisier Gary Goh.
Investors are also taking bets that other property firms may be taken private by their parent companies, who could be tempted to take advantage of the current low valuations.
Cash offers normally come with a premium to the last traded price so punters can profit from the delistings theme if they guess correctly the identity of the next takeover target.
"Rumours are flying around of other potential offers," said Mr Goh. "(Companies) in the spotlight are those trading at a substantial discount to RNAV."
The still-low interest rate environment is making it easier to launch a takeover offer, Mr Goh added.
This is because companies or wealthy individuals who want to privatise a listed firm will be able to borrow money cheaply to finance the offers.
Names that are being thrown around include Wheelock Properties, which is itself involved in the proposed takeover of Hotel Properties. CIMB Research said this week that Wheelock remains a prime privatisation candidate in the longer term given its attractive valuation, strong balance sheet, low trading liquidity and the fact that there is one major shareholder.
Among stocks on the FTSE ST Real Estate Holding and Development Index, the best performer over the past month is CapitaMalls Asia, boosted by CapitaLand's offer. It is up 30 per cent from March 20 - the recent low of the index. CapitaMalls Asia closed on Thursday at $2.19, a gain of 21.3 per cent this week.
Developer Oxley Holdings has also done well, as has Centurion Corporation, which develops and manages dormitories.
Meanwhile, CapitaLand has gained on hopes that it will benefit from the lucrative retail mall segment, especially in China, if it manages to privatise CapitaMalls Asia.
jonkwok@sph.com.sg