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CapitaMalls Asia: Being offered $2.22 a share.

Monday, April 14, 2014

I have been a CapitaMalls Asia shareholder since middle of 2011 and when I found out that the parent is offering to delist the company, I had mixed feelings.

The positive is that at $2.22 per share, the offer price is fair. The NAV/share is $1.84. So, this offer is a 20% premium to book value. NAV grew 10% year on year. So, being paid $2.22 a share, it is like getting paid in advance for growth that is likely to happen in the next couple of years.

The negative is that I will lose the chance to buy more of a stock which I believe was going through a period of price weakness, given the concerns about China. So, I was looking forward to accumulating with a greater margin of safety (i.e. buying at a bigger discount to NAV). Well, not going to happen now.

With an IPO price of $2.12 a share in late 2009, privatising CapitaMalls Asia with an offer price of $2.22 a share makes sense. It is like borrowing money from the public and paying an interest of only 1.05% per annum over a 4 and a half year period.

This is, perhaps, a good time to remember what Warren Buffett once said.

The idea that an IPO, offered with significant commissions, with all kinds of publicity, with the seller electing the time to sell, is going to be the single best investment that I can make in the world among thousands of choices is mathematically impossible.

Buffett is the reason why I have not bought into any initial public offerings in many years.

Anyway, I will probably channel the funds from this divestment into a war chest and wait for Mr. Market to feel depressed again. There is no hurry to buy anything.

Read press release: here.

Related post:
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31 comments:

AK71 said...

CapitaLand’s offer works out to about 1.2 times CapitaMalls Asia’s book value, which is cheaper than the 1.5 times book value when it listed in 2009, according to brokerage UOB Kay Hian Pte.

Source:
http://www.theedgesingapore.com/the-daily-edge/business/47983-capitaland-offers-306-billion-to-buy-capitamalls-asia-update-2.html

Solace said...

I have rated the intrinsic value of CMA to be much higher.

I am not vested, but do feel that it is a pity that it have been taken private.

AK71 said...

Hi Solace,

Since its IPO price was at 1.5x NAV, the offer to delist should be priced at around $2.70 instead. ;p

Capricon said...

AK,
Why not transfer the divestment to Croesus ? 😁😁😁

E H said...

I wondered why they chose to delist now. The reasons offered in the media release seem hogwash.

jayteesg said...

Oh man, I just divested from CMA not too long ago.

Capitaland can do what they want, but listing CMA in 2009 and then taking it private in 2014 still feels weird.

Nevertheless, they are paying a significant premium over the last-traded price and I think most investors will agree to the sale.

PSTan said...

It is indeed a pity that it will be taken private. Had been waiting for chances to buy more of it.

JY Chua said...

Here comes HPL... the offer is too low.
All Property counters will benefit with all these news.

AK71 said...

Hi Capricon,

My investment in Croesus Retail Trust is already quite significant. About ten times bigger than my investment in CapitaMalls Asia, in fact. So, unless Mr. Market were to offer an even lower price, there isn't any hurry to buy more of it. ;)

AK71 said...

Hi E H,

I think it makes sense for CapitaLand to do this for the reason I shared in my blog. ;p

Taking CapitaMalls Asia private will give CapitaLand's earnings numbers a boost. This is also true. :)

AK71 said...

Hi jayteesg,

Yes, I am sure the offer will be accepted by most shareholders. Sentiments are weak now and this offer will look attractive. In a rising market, it could be kicked into a bin. ;p

I offer to delist is, therefore, really opportunistic. I believe it is a good deal for CapitaLand.

We can think of it as if they had very cheap source of debt for a few years and they are buying back an entity that is financially and operationally much stronger now as well.

AK71 said...

Hi PSTan,

Yes, I was waiting as well. Any price under $1.60 a share and I would have bought more. Too bad, I guess. :(

AK71 said...

Hi JY Chua,

HPL too? I suppose Mr. Market will now think that all property stocks are undervalued. :)

JY Chua said...

Yes AK, OFFERING 3.50 per share.

Candy188 said...

With offer price of $3.50 by HPL, Price to Book Value is 1.12, this is within reasonable range for properties counters to be privatised.

Extracted from Maybank analyst report

=====> Our analysis also shows that Consumer-Non Cyclical seem to command the Highest valuation

=====> while PROPERTY the LEAST.

http://research.maybank-ib.com/pdf/documentrg/2013SmallCaps_110413_2076.pdf

cindy tan said...

Hi AK,
too bad I gave CMA a miss at 1.69...anyway, now am looking at yongnam at 0.225. I know you have yongnam so will you be adding more? :)

But I just read that div will be reduced to 0.006 cents. Is this still a gd price to enter since div yield is reduced to 2.6%. Wanted to get before I saw the drop in div.

Appreciate your comments. Tks!

AK71 said...

Hi Cindy,

I have an eye on Yongnam as well. I have in mind an accumulation zone which is between 20c to 22c a share. :)

For Yongnam, I am investing in a company with a good track record with the exception of last year's performance. I believe it will be a beneficiary of all the infrastructure projects in the country until 2030 at least.

Investments should pay me while I wait for them to perform. The dividend is good to have. :)

Janice said...

Hi AK,

Do you still have Marco Polo?

Would you still be adding more:)

AK71 said...

Hi Janice,

Yes, I am still a shareholder. In fact, Marco Polo Marine is a very significant investment in my portfolio.

I won't be adding to my long position unless Mr. Market were to give me an offer with an even bigger margin of safety. ;)

INVS 2.0 said...

With one player out of the public market, would I expect some ex-CMA investors to put funds in other REITs, which are witnessing some price appreciation for the past few days? :P

AK71 said...

Hi INVS 2.0,

CMA is quite a different animal compared to REITs. I don't think people who invested in CMA were really after yields. So, unless their motivations have changed, it is unlikely that they would channel the funds into REITs. Of course, if they are part income investors as well, it could happen. :)

Boon said...

so with 10 lots of CMA, do I sell now or wait for capitaland to take over?? what likely will be happened to the share prices? will it go down below 2.22?

AK71 said...

Hi Boon,

What is the price now? $2.19? I think I will wait for the offer letter from CapitaLand. :)

As for price movement, unfortunately, my bowling ball and part time crystal ball is silent on this one. -.-"

rustydoodle said...

The delist is a lucky break for me. I have lots at 2.1 and was wondering how long I will be stuck with it.

Finally I can recycle the cash elsewhere. :D

AK71 said...

Hi Rusty,

$2.10 is pretty high. I would have bought at lower prices to average down, specifically with some discount to the NAV. ;)

Well, I always say luck plays an important part in the performance of our portfolio. ;p

rustydoodle said...

Hehe I did bought some at 1.75 in Feb to average down and I nearly sold them when it climbed to 1.83. Lucky I didn't. :D

AK71 said...

Hi Rusty,

That is good news. I feel happy for you. :D

Rei Yang said...

Hi, I am actually a student doing a project report on CaptialMall Asia and came across this site while doing research. So does this mean that once CapitaLand buys up CapitalMall Asia, there will no longer be a CapitalMall Asia Stock, JS8? So no one will be able to buy the stock anymore in future? What will happen to the people who currently holds JS8 stocks? Will their stocks automatically convert to CapitaLand, C31, stocks? Would appreciate if someone can shed some light on me regarding this. Thanks.

AK71 said...

Hi Rei Yang,

Basically, if you are a CapitaMalls Asia's shareholder, CapitaLand is offering to buy all your shares for $2.22 a share.

So, you will get money. You won't be getting any shares in CapitaLand. :)

Rei Yang said...

So after that JS8, CapitalMall Asia stocks, will be taken out of the list of stocks you can buy on STI is it?

AK71 said...

Hi Rei Yang,

Yes, if taken private, CapitaMalls Asia will be delisted and its shares no longer available in the stock market. ;)

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