17-03-2014, 02:41 PM
(16-03-2014, 08:17 PM)MINX Wrote: [ -> ](16-03-2014, 05:53 PM)Boon Wrote: [ -> ]Here are my takesThanks for explaining things in simple understandable terms.
St James = a SGX listed Company (Catalist) with entertainment business.
PREH = a private company in real estate business with real estate assets in Singapore and China
“Vendors” = PREH + certain other persons >> owns 26.11% of PCRT
Act 1 = Restructuring of St. James = “divestment” of entertainment business + “injection” of “Vendors” assets (through share swaps) into St. James (inclusive of 26.11% of PCRT)
The “transformed St. James” would be renamed “PREHL” and to be moved from “catalist” to the Main Board of SGX
Act 2 = VGO of remaining units of PCRT
Act 1 would set as a Pre-Condition for Act 2
To me, the traditional classic RTO is Act 1 – “takeover” of “St. James” (a listed entity) by the “Vendors” (PREH，a private company + private investors).
Act 2 is a normal takeover (also through share swaps) .
If Act 2 is unsuccessful, PCRT will remain as it is - as a listed Business Trust.
IMO, to the "Vendors". the significance and importance of the deals is in Act 1.
(not vested)
Putting yourself in the shoes of PCRT's minority shareholders, do you view this as a ok or raw deal? From what I can figure out from their "not-so'easy-to-understand" announcement, my concerns are:
1) The offer price of 70c is not sweet enough, it is below NAV(74c). Granted 2 of their malls are still under development, one opening next month, however these malls are served by excellent transport links & have potential to generate good income.
2) The offer is not in cash but a share swap with no plan B for those not for the proposal. Is the new entity share price over inflated which makes it a lose-lose situation for minority shareholders?
3) The china malls are being taken over at 25% discount to their valuation, this on top of the already discounted offer price of 70c, head thet win, tail you lose dilemma?
4) The new entity will venture into Myanmar, a new frontier market, read high risk venture?
Would be nice to hear your views?
Earlier on, I mentioned that – “IMO, to the "Vendors", the significance and importance of the deals is in Act 1.”
On closer scrutiny, Act 2 is just as equally and critically important.
On completion of Act 1, the “Vendors” would have owned more than 99% of PREHL – a situation in which there is insufficient shareholders spread to maintain its listing status – therefore, the rationale for Act 2 is obvious – to increase shareholders spread or shareholders base to meet listing requirement.
Question:
Is this a “raw deal” to the minority/non-controlling unit-holders of PCRT?
IMO, it is a “raw deal” for
1) “Disclosure issues”- “lack of disclosure and standard of disclosure”.
2) Due to 1), minority unit-holders of PCRT could not carried out “proper due diligence” including pricing of the VGO consideration.
Act 1 is essentially “back-door-listing”.
Imagine, if the “Vendors” were to come in through the “front-door” – by IPO, it would at least have to come up with an “IPO prospectus”, which essentially contains “MUCH-MORE” information on the “would-be-transformed” new entity – PREHL.
PCRT has gone through the front-door and has been listed for slightly less than 3 years now. There are information available on PCRT, but which are not available on PREHL that IMO, are essential for investors to value PREHL (including pricing of the risks) correctly.
These information include but not limited to the following fews :
a) What are the land tenure of properties in PRC and Singapore? (Information on PCRT properties available)
b) What are the holding structures for ownerships of PRC properties? Through “intermediate offshore holding companies”? Are there differences between PRC assets of PCRT and PREHL – have tax implications on dividend repatriations and asset disposal.
c) How are values of debt, equity, enterprise value in PREHL being measured, compared to PCRT? (there are many valuation matrix/methods to value a company – at least all relevant data should be made available to investors)
d) The list could go on.
In essence, a lack of easily and readily accessible information on back door listings compared with IPOs could make analysis on them challenging.
To many, backdoor listings are effectively a marriage of convenience. In effect, new entity has been created in the process. Some critics argue that the rules should broadly be the same, regardless of if the company uses the market’s front or back door – for those that chooses to come through the back door, they would have to re-comply with exchange admission requirements – which I strongly agreed (but not a re-compliance that is equivalent to a full IPO-compliance)
As in the case of PREHL, the standard of disclosure would have to be such that investors should have enough information to value the company (including pricing of its risks) correctly – this is my “minimum re-compliance” requirement for back door listing.
In short, I have not "enough" information to value (including pricing of its risks) PREHL correctly.
(not vested)