Sunday, 28 March 2021

Capitaland Restructuring- Pattern More Than Badminton

The talk of the week everywhere has been on the Capitaland restructuring plan. I am not sure why everyone is so excited by it but the fact that the Net Asset Value Per Share is around S$4.88 (if you exclude the one off fair valuation revaluation losses and impairment of S$2.49 billion due to COVID) while the offer is worth only S$4.01 says a lot about this deal which is not too fantastic in my personal opinion since there is still 20% off the intrinsic value mark once the economy recovers further. The additional risks here is also whether the deal will be approved by shareholders and whether the new Capitaland real estate investment management division is really worth its S$1 Net Asset Value, are the other main unknown factors. I have always been amazed by how those very clever corporate folks delist companies and then relist it in another form to so called "un-lock" market value.

Perennial China Retail Trust morphed into Perennial Real Estate Holdings
Another good example is back in 2014, Perennial China Retail Trust ("PCRT") also did a corporate restructuring. Back then, unitholders who choose to accept the buyout offer of S$0.70 per unit will receive 0.52423 shares in Perennial Real Estate Holdings Limited ("PREHL") via a backdoor reverse takeover of St James Holdings. This deal is from a pure China Retail Trust holding shopping malls into a real estate company which includes property development. The virtues of such a move at that time as marketed by the very clever corporate professionals is on the "diversification" into different growth businesses such as China integrated railway hub development and cost savings synergy from "economies of scale". Then even more recently last year, the storyline on Perennial is that they have been privatized but I am sure that Perennial will one day come back for another SGX listing again albeit in another form. 

Aztech privatisation and relisting on SGX
More recently, Aztech also came back for a SGX listing of its Internet of Things ("IoT") & Data Communication products,  LED lighting products and Kitchen appliances electronic manufacturing business. Back in 2016, Aztech was previously listed on the SGX before getting privatized in a not too fantastic deal on. Aztech's share price had fallen drastically from S$1 per share in May 2015 to S$0.32 per share on 16 September 2016. The Aztech Group was then subsequently taken private with the co-founder and CEO offering a S$0.42 per share but now they relisted their new business for S$1.28 per share. 

Parting thoughts- Pattern more than badminton?
Personally, I see a pattern in these sort of corporate actions. I will not be too surprised that in another few years down the road, Capitaland may announce a re-merger of its property development business and then calling it the forming of a "combined power house into a dominant global real estate player". I will prefer to stick to my pure vanilla of Capitaland Integrated Commercial Trust, Ascendas REIT and Capitaland China Trust.

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