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CapitaMalls Asia: Farewell.

Saturday, May 3, 2014

I have filled the form in acceptance of the voluntary conditional cash offer for CapitaMalls Asia.

Although there are arguments that the offer price is unfair and although I can understand the arguments, I feel that there is a great degree of subjectivity too. Much is relative.

Just like how we compare an investment with another to see how it could be undervalued or overvalued, we could also compare an investment with itself in the past to see how its value has changed over time.


CapitaLand’s offer works out to about 1.2x CapitaMalls Asia’s book value now which is cheaper than the 1.5x book value when it listed in 2009. If we want 1.5x book value today, the price is closer to $2.70 a share.

So, for someone who bought into CapitaMalls Asia at the IPO price of $2.12 a share, obviously, the voluntary conditional cash offer of $2.22 a share leaves a bad taste in the mouth. However, for someone who bought at under $1.20 a share during the lows in late 2011 which was at a 20% discount to the NAV/share back then, $2.22 is probably a sweet enough exit price.

I think it is a fair enough offer and I explained why in an earlier blog post:

"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."

We might want to remember what Warren Buffett thinks of IPOs. If you cannot remember, go to the earlier blog post I mentioned above: CapitaMalls Asia: Being offered $2.22 a share.

Better to wait for a price that is so attractive that even a mediocre sale gives good results.

26 comments:

TG 79 said...

Hi AK 71

I bought Capitamalls Asia shares at around $2.10. If I choose not to accept the offer, may I know what will happen? Pardon my ignorance :) I'm new to investing and this is the first time I encounter voluntary conditional cash offer.

Regards,
TG 79

AK71 said...

Hi TG,

CapitaLand could compulsorily acquire all the shares if they receive acceptances of not less than 90% of the remaining shares.

TG 79 said...

Hi AK

Thanks for your prompt reply. If acceptance is less than 90%, does it mean that I still get to keep my CMA shares and can sell it when I decide to? For those who choose to accept the cash offer, they will still be paid by Capitaland even if acceptance is less than 90%? Thank you.

Regards,
TG

AK71 said...

Hi TG,

The offer is a conditional one and the condition is that they have to be in control of at least 90% of the shares. So, if that does not happen, they will not buy the shares from those who have accepted the offer. However, they could amend the condition.

If they do amend the condition in the event that they do not control 90% of the shares, then, I suppose you get to keep your shares and, of course, you could sell to some other buyer in future.

TG 79 said...

Thank you for your clear explanation AK :)

Garfield75 said...

Ak , have u receive the independent directors' report? Any stock that u intend to invest your proceeds ? I bought some after reading your earlier blog and manage to average down and make some money. Thank u;)

AK71 said...

Hi Garfield,

Hey, you made the decision to buy. I was just talking to myself as usual, you know. ;)

Anyway, I didn't buy more in the recent bout of weakness. I was waiting to buy more cheaper. -.-"

This is more proof that your purchase is due to your own savvy. :)

If you are referring to the independent financial advisor's opinion, nope, I have not received it. Why not wait then? Well, I don't think it would change anything really and I think the offer is a decent enough exit price for me.

Right now, I am hoarding cash. The last time I bought into a stock was in early February. That was Hock Lian Seng at 25.5c. Before that, I got more of Croesus Retail Trust at 87c in January.

I will now wait patiently for Mr. Market to go into one of his depressions before buying from him again. :)

Garfield75 said...

I bought hock lian Seng too , but just a bit;) . Thanks hah.

AK71 said...

Hi Garfield,

You are a Hock Lian Seng shareholder too? I am in good company then. Safe! ;p

Garfield75 said...

Ak,

I bought HLS after seeing your blog again, so it is a circular reference if you are seeking some comfort;) . What do you think about yangzijiang and courts.... I would say both are tried to o boast their income via some micro-loans and credit sales. The former seems to be getting a good order book.

AK71 said...

Hi Garfield,

Crossing fingers, then. ;p

I have not done any research on YZJ and Courts. I have read what others have said though. YZJ seems to be doing well in a difficult industry while Courts has some serious issues with competition and regulations regarding credit in Malaysia.

A fellow blogger, Mike, has done a lot of work on YZJ. You might want to read this:

http://singaporeanstocksinvestor.blogspot.sg/2013/09/tea-with-mike-analysis-of-yangzijiang-s.html

Garfield75 said...

Thanks! AK . That was a good write-up.

AK71 said...

Hi Garfield,

Yes, Mike does good and detailed analyses. Very lucky to have him guest blogging here once in a while. :)

You might also want to visit his blog: http://sillyinvestor.wordpress.com/

Garfield75 said...

Hmm ... Check out his blog....equally intellectual....but yours is more bite-size for simple investor like me..and entertaining esp. your meals choice. ;)

AK71 said...

Hi Garfield,

Thank you very much for the encouragement. I will put in more effort in producing more high quality blogs about my meals! LOL. ;p

On a serious note, I admire people who are able to spend so much time and effort in analysing stocks and sharing their analyses in detail with others in a blog. I can never do as good a job as some of them. :)

Chia Chin Yeh said...

What will happen to my dad's bond with capitalmall after capitaland bought and delist capitalmall?

AK71 said...

Hi Chia,

Bond holders will not be affected. They still get to keep the bonds. :)

Chia Chin Yeh said...

Thanks

Passive Income Builder said...

and there is a revised offer price to $2.35! Wow! http://www.straitstimes.com/news/business/companies/story/capitaland-raises-offer-price-capitamalls-asia-20140516

AK71 said...

Hi PIB,

This is very good news. Thanks for the heads up. :)

"The Joint Financial Advisers wish to announce, for and on behalf of the Offeror, that the Offeror is revising the Offer Price as follows:

"For each Offer Share: S$2.35 in cash (“Final Offer Price”)

"Shareholders who have earlier accepted the Offer and have not withdrawn their acceptances within the Withdrawal Period will receive the Final Offer Price per Offer Share."

http://infopub.sgx.com/FileOpen/Sound_Investment_Holdings_Pte_Ltd_Revision_Announcement_dtd_16_05_2014%20pdf.ashx?App=Announcement&FileID=297545

AK71 said...

$2.35 per CMA share. The renewed offer price is at a 26.8% premium to CMA’s book.

CMA shareholders whose valid acceptances have been received on or before May 16 will be paid within 10 days. The offer will close at 5.30 pm on June 9.

Mummy of J said...

Hi AK

Can i enquire what is the diff bet accepting their offer at $2.35 and selling the shares at $2.35?

i sold some of my shares at $2.35 and $2.36 respectively before the revised offer came up.

Thank you.

Mum J

AK71 said...

Hi Mum J,

Well, the only difference I can think of is brokerage fees. When we sell in the open market, we have to pay brokerage fees. :)

AK71 said...

CapitaLand has raised its stake in CapitaMalls Asia (CMA) to 85.2 per cent, bringing it closer to crossing the 90 per cent level that would enable it to delist its shopping mall arm.

CMA is one of Asia's largest shopping mall developers and operators, with interests in more than 100 shopping malls across Singapore, China, Malaysia, Japan and India.

"We are pleased with the positive response towards our final offer price of S$2.35 per share for CMA shares," Capitaland, Southeast Asia's biggest developer, said in a statement on Tuesday (May 27).

http://www.channelnewsasia.com/news/business/singapore/capitaland-s-stake-in/1123796.html

AK71 said...

CapitaLand on Thursday said its ownership of CapitaMalls Asia had crossed the 90% threshold, meaning it could delist the shopping malls operator from the Singapore Exchange.

CapitaLand, Southeast Asia’s biggest property developer, offered in mid-April to buy out minority shareholders in its then 65% owned CapitaMalls Asia at $2.22 per share, a 23% premium to the last closing price of $1.80. They later raised the offer price to $2.35.

Now, with the threshold past, CapitaLand said it had submitted an application to the bourse for the delisting of CapitaMalls. Chief executive Lim Ming Yan said the offer would allow CapitaLand to better leverage resources across the group’s businesses to maximise overall project returns.

There has been a spate of acquisitions in Singapore’s real estate sector over the past two years, as tycoons take advantage of depressed prices to delist property firms.

Source: Reuters, 05 June 2014.

AK71 said...

CapitaLand says that CapitaMalls Asia Limited will become a wholly-owned subsidiary of CapitaLand with effect from July 21, when the compulsory acquisition exercise will be completed. The stock will also be delisted from the Singapore Exchange and Hong Kong Exchange with effect from 9 am on July 22.

http://www.theedgesingapore.com/the-daily-edge/business/49122-capitamalls-asia-to-be-delisted-from-july-22.html

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