Monday 2 May 2022

Take It With A Pinch Of Salt-The Reluctant Half-Baked Chain Offer for SPH REIT By New Major Shareholder Cuscaden Peak And 3 Points To Note.

I thought that the current offer price of S$0.9372 per unit for SPH REIT by Cuscaden is just a half hearted and half baked one- in fact it is forced under SGX rule to make this chain offer- so do not expect too much from it and don't waste too much time pondering over it. Cuscaden looks like it is heavily bruised from the tussle with Keppel Corp over the recent Singapore Press Holdings acquisition. While it won a great battle for taking control of Singapore Press Holdings, it had burned a big hole in its bank account and it is clear that at this particular juncture, Cuscaden is ok for it to remain listed as it is. 3 things to take note of, regarding this upcoming acquisition offer for SPH REIT:

1. The market price as at 29th April 2022 is S$0.975 per unit but chain offer price is at S$0.9372 per unit.
I had a good laugh at this. The cash offer is 3.88% lower than the last closed price. Ok, what this means is that unit-holders who are looking to sell their units are better off selling their SPH REIT units on the market rather than accepting the chain offer from Cuscaden. So why is Cuscaden making an illogical offer then? The answer is as aforesaid mentioned, because from the SPH acquisition exercise,  they now owned more than 30% of SPH REIT and SGX rule stipulated that they need to make a general offer for the rest of SPH REIT. 

Nevertheless, I would expect the unit price of SPH REIT to drop immediately to match the S$0.9372 per unit upon resumption of trading on 4th May 2022 ( Wednesday). If so, this chain offer would have destroyed much value for SPH REIT. 

2. No one knows exactly what Cuscaden intends to do with the assets acquired under SPH hence future of SPH REIT is also a big question mark.
The consortium of Cuscaden is made up of Hotel Magnate Ong Beng Seng's Hotel Properties (40%) and 2 Temasek-linked units, namely Capitaland (30%) and Mapletree (30%). Ong's lieutenant has not officially announced how the 3 parties intend to split the assets such as Student Accommodation, Seletar Mall, Woodleigh Mall etc among themselves. 

I frown upon the future of SPH REIT which remains muddy with no clear sense of direction.
3. It is a myth to believe that SPH REIT still has a solid backer with Temasek Holdings behind it. 
Now, this is the part that I personally believe is no longer the same case as Mapletree REITs, Capitaland REITS and Keppel REITs. The entry of Ong Beng Seng and his Hotel Properties holding the most individual party shares of 40% in Cuscaden means that Ong is now in the driver seat. In the event of a major crisis, there is a high probability that Temasek will not be diving in to the rescue immediately and with resources going out to other Singapore government linked REITs first.

On 29th and 30th November 2021, I have sold off all of my 44,000 units of SPH REITs at an average price of S$1 per unit mostly due to the fear of the omicron wave spreading as well as the uncertainty over SPH REIT's future. Subsequently, I have re-deployed some of the funds into Capitaland Integrated Commercial Trust instead while waiting for better visibility on Cuscaden's plan for SPH REIT.  

Parting Thoughts
In summary, I think that SPH REIT is now a totally different creature altogether relative to its former old self in-spite of holding on to the same investment properties. I hope that with the SPH acquisition completed and dust settling, the Cuscaden consortium will at least reveal more of its hidden cards on how it wants to run the newly acquired businesses.   

No comments:

Post a Comment