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Tuesday, May 31, 2011

Mixed views on two offers

PETALING JAYA: Reactions of analysts are mixed about whether minority shareholders of Asia Pacific Land Bhd (AP Land) and OSK Property Holdings Bhd should accept takeover offers for the property developers.

Some opine that shareholders should ask for a higher price for the takeovers, considering that both offer prices are at significant discounts to the book values of the two companies.

On Friday, OSK Property’s major shareholders offered to buy up the remaining of the company they do not own for RM120mil or 87 sen per share.

The stock closed at 79.5 sen just a day before the offer was made. This means that the offer price by OSK Property’s major shareholders was at a mere 9% premium over the last traded market price.

Against OSK Property’s latest net assets per share of RM1.74, the offer price is a 50% discount.

For the financial year ended Dec 31, 2010 (FY10), the company posted revenue of RM144.9mil against RM125.8mil a year ago. Net profit for FY10 was RM11.9mil against RM5.1mil in FY09.

As at the end of FY10, OSK Property’s cash and cash equivalents stood at RM53.2mil.

The company currently trades at 11.25 times price/earnings ratio and has a market capitalisation of RM163.02mil.

Interestingly, the offerors did not provide any rationale for making the offer to take over OSK Property.

Considering the offerors for OSK Property – led by Ong Leong Huat – is making a general offer for the shares of the former, they would need to secure up to 90% acceptances before they can take the company private. This would mean that shareholders have ample room to reject the offer on the table if it is not up to expectations, explained an analyst.

In the case of AP Land, the offer was at 45 sen per share, which is a 9.8% premium over AP Land’s last traded price of 41 sen before the announcement was made, but only 7.7% over yesterday’s closing price of 41 sen.

AP Land’s net asset value per share has stayed above RM1 since 2005.

Under the new takeover rules, offerors will need at least 75% of non-interested shareholders to accept an offer before it can go through.

“This puts more power into the hands of minority shareholders, who can insist of a higher price for the assets of their company,” said one analyst.

On the other hand, the takeover offers do provide an exit opportunity for minority shareholders in companies whose share prices have not performed.

Analysts said that in general, the rationale for these exercises was that both companies had failed to attract market attention and therefore the value of their shares did not reflect the companies’ underlying strengths.

AP Land’s offeror is its parent company, the Low Yat group, which stated the following as the rationale for its exercise: “The liquidity of the trading of AP Land shares has been relatively low, with a trading volume of approximately 349,429 AP Land shares per day during the past one year.

“Therefore, it may not be easy for the shareholders of AP Land to be able to realise their investments in AP Land on the open market.

“The proposals will accord an opportunity for all AP Land shareholders to realise their investment in the company in the short to medium term at a reasonable premium above the historical market prices of AP Land shares ...”

AP Land’s major property projects include Bandar Tasek Puteri in Rawang and a residential development comprising luxury apartments in the Niseko region of Hokkaido, Japan.

Properties under OSK Property’s stable include luxury homes, townships and The Atria Shopping Complex in Damansara Jaya.

By The Star

Analysts have mixed views on Genting’s land purchase in Florida

PETALING JAYA: Genting Malaysia Bhd's land acquisition in Miami, Florida for US$236mil received mixed reactions from analysts while the move is seen as the way to diversify its earnings base and spur growth going forward.

ECMLibra Investment Research viewed the move positively given the choice location of the waterfront property, adding that Florida attracted up to 82.3 million visitors in 2010, of which 87% were local visitors.

“The announcement has made no mention of casino operations but we view that the announcement will be in due course as licences would be required from the Miami-Dade County,” it said in a report yesterday.

Reported in the South Florida Business Journal, Resort World Miami (RWM) president Mike Speller said Genting Malaysia would fund the US$2bil development cost of the project without stating the funding details.

Kok Thay ... ‘Downtown Miami has experienced dramatic residential and commercial growth in recent years.’

CIMB Research is neutral on Genting Malaysia's acquisition and the research house thinks that the deal positions Genting Malaysia to capitalise on the potential liberalisation of “resort-style” gaming in Florida.

It pointed out that there was a question mark over whether the Florida state government would liberalise such gaming in the state.

“This purchase, however, is sizeable, indicating the group's confidence in the success of the mixed development project, in our opinion,” it said.

CIMB left its earnings projections unchanged, pending more details on the acquisition.

“Assuming bank borrowings of US$200mil (85% of total price), we estimate that its net cash will fall by about 33% to RM1.5bil. The total price accounts for less than 1% of the group's shareholders' equity,” it said.

HwangDBS Vickers Research said: “While it is still early to assess earnings impact for RWM, we do not expect any meaningful contribution over the next two to three years. Genting Malaysia's foray into the United States, if successful, will help diversify earnings base and spur growth.”

Genting Malaysia announced last Friday that its subsidiary Bayfront 2011 Property LLC had purchased 13.9 acres in Miami for US$236mil, with plans to build a mixed-use development.

The land includes the building currently housing The Miami Herald Media Company and an adjacent parking lot.

It said in a press release that it was working towards developing a comprehensive master plan for RWM, as the development would be called, which would include hotel, convention, entertainment, restaurant, retail, residential and commercial facilities.

The project aims to capitalise on Miami's standing as one of the world's leading tourism hubs.

Its chairman and chief executive Tan Sri Lim Kok Thay said: “Downtown Miami has experienced dramatic residential and commercial growth in recent years, and we believe the addition of a large-scale mixed-use and entertainment complex will be a welcomed addition, further elevating the area's status as a global destination.”

The acquisition is an integral step for Genting Malaysia as it seeks to expand internationally in the leisure, hospitality and entertainment industry.

The envisioned RWM represents Genting Malaysia's second venture into the United States, after Resorts World New York at the historic Aqueduct Racetrack in the city of New York.

By The Star