Date: April 24, 2014
SIAS refers to the articles in BT on 22 April “CMA shareholders should stand their ground against ‘fair offer’ by Michael Dee, who has claimed that minority shareholders’ rights are not adequately represented in the CMA offer by CapitaLand. SIAS is concerned and has given Mr Dee’s article serious consideration. Accordingly, this statement is issued as a guidance only to CMA’s minority shareholders.
The article states that CMA is a cash cow and is worth more than the offer by CapitaLand. While SIAS does not comment on valuations and relies on IFA advice, SIAS has looked at various analysts’ reports to provide some perspective. While the sum-of-parts valuation differs with some noting higher valuation, these reports point out that CMA has not traded above S$2.22 in the past three years, bar a brief period in Jan/Feb 2013. Further, the nearest comparable, Hang Lung Properties (101 HK, HK$23.70, Neutral, TP: HK$21.90) is trading at 0.86x P/BV.
At IPO, CMA was at 1.55x (price/book), but this was when CapitaLand was trading at around 1.38x and its peers were trading between 0.97x – 1.67x book value. Currently, the proposed offer is to buy CMA at 1.2x book value, while CapitaLand and its peers are trading much lower at 0.77x and 0.72x – 0.91 x book value respectively. The offer price also represents a total return of 12.9%p.a. and 21.9% p.a. for investors over the last one and two years respectively. Shareholders should note that the offer price is at premium to book value and not at a discount. Shareholders should also consider when CMA went IPO, it was debt free and all the pre-IPO debt was assumed by CapitaLand which provided CMA with debt headroom for its growth.
We understand that there is no assurance that the offer would be unconditional if the offer does not receive 90% shareholder acceptance. As BT columnist, Sivanithy has noted the real question is would CMA and all offeree company shareholders be better or worse off if the respective offers are withdrawn?
Shareholders must take these factors into consideration when evaluating CapitaLand’s offer. It would be more prudent to wait for report from the appointed Independent Financial Adviser, Deutsche Bank who would have access to more comprehensive information to better evaluate the offer for the shareholders. That would be the appropriate time, in our view, to make an informed decision.
Separately, SIAS takes a serious view about board independence and the role of independent directors in representing the views of minority shareholders. In this case, SIAS understands that all non-independent directors of CMA are excluded from evaluating the offer and the lead Independent Director, Dr Loo Choon Yong is taking charge of the Independent Board Committee which consists of all directors that are independent to CapitaLand. SIAS also understands SIC has approved the independence of these directors. On this basis, SIAS is satisfied that there is independence in the review of the offer and minority shareholder interest has been addressed sufficiently.
David Gerald
President & CEO
SIAS
