The Securities Investors Association of Singapore (SIAS) is appealing to Boustead Singapore to improve on its 90 cent per share privatisation offer for its majority-held, separately-listed subsidiary, Boustead Projects.
In a letter to Boustead Singapore’s board on behalf of “aggrieved” shareholders, David Gerald, president of SIAS, acknowledges that the offer price is 7.8% over Boustead Projects’ last traded price of 83.5 cents.
However, as at Sept 30 2022, the company, which focuses on real estate, had a net asset value of $1.265 per share.
“Put differently, the valuation of 0.7x Price/NAV has left a bitter taste in the mouths of Boustead Projects’ minority shareholders given that most of the properties held in the books are valued at historical cost,” says Gerald.
CGS-CIMB analyst Ong Khang Chuen, in his Feb 7 note, has given Boustead Projects a revalued NAV of $1.79 per share, and indicates that the offer price, at half of this level, favours Boustead Singapore.
“After examining the details of the offer, SIAS’s view is that the minority shareholders have a case, and calls upon Boustead Singapore to revise its offer upwards,” says Gerald.
See also: Boustead Singapore closes exit offer for Boustead Projects shares
However, Gerald agrees that no offeror can “realistically be expected to pay the maximum perceived value for a company it is seeking to acquire and privatise. Offerors will always pitch their prices as low as possible whilst offerees will always hope for the highest possible price.”
In this case, the discount to asset value “is simply too large to ignore”. And therefore, a “middle ground” should be found.
Gerald calls for an offer price closer to the NAV of $1.265.
As at 10.47 am, Boustead Singapore shares traded at 87 cents; Boustead Projects shares traded at 95 cents - 5 cents above the 90 cents offer price.
