By The Star
THERE is now a widely-held view that economic growth levels in Asia bottomed in the first quarter, with growth rising a faster clip from the second quarter.
That would mean economic data and company results that are being released for the first quarter would still be weak, with losses even for some of the companies. Most of their profits are now expected to improve, or be back in the black, in the current second quarter.
While the Chinese were convinced since January when their markets started to surge, there is conviction of this only now in the rest of Asia.
For this reason, it is only in the last one month that the other Asian markets, including Malaysia’s, made a swift, speculative rise.
There was a clear speculative tone in the run as many of the stocks that surged were penny stocks or those of companies that made losses.
Besides speculative trading by punters, there is some rhyme and reason for the prices of bombed out stocks to surface. While critics may say that most of the small cap companies are not worth much, prices of their stocks are now viewed as being been suppressed too far.
It can be argued a link house in Petaling Jaya may be worth RM500,000 and that a similar house in the distant suburbs is worth less but it should not be priced at just RM50,000 either, to use an analogy of property.
The announcement on Friday of a proposal to take small cap company SRII Bhd private shows its major shareholders know the stock is under-valued.
The exercise to take the company private will cost RM35mil cash but the company itself has RM40mil cash. So, it’s a straight-forward exercise that will be self-financed. SRII is a supplier of fire-fighting equipment.
All listed property stocks are similarly under-valued relative to their assets, and properties tend to regain their values over time. It’s sometimes speculated they will be taken private, but the critical question that must be answered is how will the exercise be funded.
Last week, as SRII announced the offer for its minority shareholders, Johor Corp made an offer of RM1.55 cash a share for the rest of the shares in its subsidiary Johor Land Bhd.
Johor Land is not cash-rich but it has a large land bank such that its net assets amount to RM5.40 a share. As a large state agency, Johor Corp will not have a problem financing the full takeover.
For most other owners, bank financing for takeover exercises is not available at this time. Hence, to take a company private, there are three criteria of which at least one must be fulfilled.
THERE is now a widely-held view that economic growth levels in Asia bottomed in the first quarter, with growth rising a faster clip from the second quarter.
That would mean economic data and company results that are being released for the first quarter would still be weak, with losses even for some of the companies. Most of their profits are now expected to improve, or be back in the black, in the current second quarter.
While the Chinese were convinced since January when their markets started to surge, there is conviction of this only now in the rest of Asia.
For this reason, it is only in the last one month that the other Asian markets, including Malaysia’s, made a swift, speculative rise.
There was a clear speculative tone in the run as many of the stocks that surged were penny stocks or those of companies that made losses.
Besides speculative trading by punters, there is some rhyme and reason for the prices of bombed out stocks to surface. While critics may say that most of the small cap companies are not worth much, prices of their stocks are now viewed as being been suppressed too far.
It can be argued a link house in Petaling Jaya may be worth RM500,000 and that a similar house in the distant suburbs is worth less but it should not be priced at just RM50,000 either, to use an analogy of property.
The announcement on Friday of a proposal to take small cap company SRII Bhd private shows its major shareholders know the stock is under-valued.
The exercise to take the company private will cost RM35mil cash but the company itself has RM40mil cash. So, it’s a straight-forward exercise that will be self-financed. SRII is a supplier of fire-fighting equipment.
All listed property stocks are similarly under-valued relative to their assets, and properties tend to regain their values over time. It’s sometimes speculated they will be taken private, but the critical question that must be answered is how will the exercise be funded.
Last week, as SRII announced the offer for its minority shareholders, Johor Corp made an offer of RM1.55 cash a share for the rest of the shares in its subsidiary Johor Land Bhd.
Johor Land is not cash-rich but it has a large land bank such that its net assets amount to RM5.40 a share. As a large state agency, Johor Corp will not have a problem financing the full takeover.
For most other owners, bank financing for takeover exercises is not available at this time. Hence, to take a company private, there are three criteria of which at least one must be fulfilled.
- The company must have cash to self-finance the exercise;
- Some of its properties can be pre-sold to finance to the exercise;
- It must have a very large or cash-rich offerer.
Like SRII, Plenitude Bhd is an obvious case of a company that can easily be taken private. The company held cash of RM198mil at the end of last year and received RM64mil cash in February from the sale of a piece of land. Together, that amounts to RM262mil cash which coincidentally equalled its total market value.
It would cost a lot less than that since three substantial shareholders already own 72% of Plenitude. That leaves just 28% to be bought to own the entire company. They would then fully own a company with cash and about RM300mil worth of property assets.
Glomac Bhd is a company that some analysts believe might be taken private. Like many property stocks, its share price has dropped to 62 sen against net assets of RM1.85 a share.
It does not have net cash though, and would need to lock in sales of some properties to finance a full takeover.
Inch Kenneth Kajang Rubber plc is in a similar situation, with its share price at 25 sen against net assets of RM1.23 a share, and no net cash.
Its assets, other than properties, are well in excess of its bank borrowings of RM20mil. In addition, it has two large pieces of plantation land which are now close to town due to urban sprawl.
It has expressed an intention to sell 600 acres in Bangi, which it said could fetch RM350mil. If it were willing to lower that to RM200mil, it could quickly find a buyer among the listed property companies. That would still be twice the company’s total market value of RM107mil.
In addition, Inch Kenneth owns 350 acres in Kajang, which it said is planned for a township project with a gross development value of RM1.2bil.
Last week, two brokerages issued reports on the property sector, pointing out it encompasses high beta (volatile) stocks. It makes sense that as property stocks were sold down heavily ahead of a global recession, they’ve a lot of ground to regain in an economic recovery.
The window for taking property companies private, however, is closing fast as the stock market re-rates stocks towards higher price-to-book values and price/earnings ratios. The exercises to take private IOI Properties Bhd and Johor Land was just in time. For the other property companies, it’s now or never.
*Many public companies are trying to privatise as all their stock are under value. So is there any gd performing company that do not have the sufficient cash/fund to take themself private? Or are they any companies that are planning to privatise? Its time to do some research and earn some quick money!
It would cost a lot less than that since three substantial shareholders already own 72% of Plenitude. That leaves just 28% to be bought to own the entire company. They would then fully own a company with cash and about RM300mil worth of property assets.
Glomac Bhd is a company that some analysts believe might be taken private. Like many property stocks, its share price has dropped to 62 sen against net assets of RM1.85 a share.
It does not have net cash though, and would need to lock in sales of some properties to finance a full takeover.
Inch Kenneth Kajang Rubber plc is in a similar situation, with its share price at 25 sen against net assets of RM1.23 a share, and no net cash.
Its assets, other than properties, are well in excess of its bank borrowings of RM20mil. In addition, it has two large pieces of plantation land which are now close to town due to urban sprawl.
It has expressed an intention to sell 600 acres in Bangi, which it said could fetch RM350mil. If it were willing to lower that to RM200mil, it could quickly find a buyer among the listed property companies. That would still be twice the company’s total market value of RM107mil.
In addition, Inch Kenneth owns 350 acres in Kajang, which it said is planned for a township project with a gross development value of RM1.2bil.
Last week, two brokerages issued reports on the property sector, pointing out it encompasses high beta (volatile) stocks. It makes sense that as property stocks were sold down heavily ahead of a global recession, they’ve a lot of ground to regain in an economic recovery.
The window for taking property companies private, however, is closing fast as the stock market re-rates stocks towards higher price-to-book values and price/earnings ratios. The exercises to take private IOI Properties Bhd and Johor Land was just in time. For the other property companies, it’s now or never.
*Many public companies are trying to privatise as all their stock are under value. So is there any gd performing company that do not have the sufficient cash/fund to take themself private? Or are they any companies that are planning to privatise? Its time to do some research and earn some quick money!
