Why are property stocks being privatised these days? I thought it happens only in Malaysia but it’s also happening in Singapore. In one latest report by Bloomberg, it said that 66 percent of the listed property developers are trading at less than the value of their net assets. In other words, if you were to buy their stocks and they decided to stop being listed, you would get more money in return after they have sold off all their assets. Beginning 2010, six developers have been privatised with an average share-premium of 26 percent.
The reason they are privatised is simple. The money paid to buy up the remaining shares held by public versus its potential returns and even its assets are money well spent. This applies to any listed developer which may not need much funding. In fact once privatised, funding can come from its parent company. This is a good time to buy because due to the negative property market sentiment, it is harder to sell what they build and this in turn has affected the revenue as well as profits. With worse results, the prices take a further beating. Privatising now may even be hugely profitable once the companies are relisted in future during buoyant property market situation.
In Malaysia, one huge case is the one by IJM. Read here: IJM Corp, IJM Land, RM1.98B privatisation deal The reasons are similar to what was listed above. In Singapore, some of other potential developers to be delisted include Ho Bee Land Ltd., Wheelock Properties Singapore Ltd. and Guocoland Ltd. Main reason for these three, according to Vibrant Pandey, an analyst with UOB-Kay Hian Holdings Ltd is because their shares are cheap. They are trading at only 0.6 times and 0.8 times their book value based on data compiled by Bloomberg.
2015 is unlikely to see any sudden recovery of the property market in Singapore. In fact it has dropped to a six-year low in 2014 according to data from Urban Redevelopment Authority. I have no overseas account to trade Singapore stocks but I think if it is really trading at only 0.6 times its book value, I would buy and just let it be either until it is privatised or when the market recovers and pushes up the price to a more reasonable level. I follow only a few Malaysian property stocks. If anyone knows of similar stocks, please let me know yeah. Cheers.
written on 1 May 2015
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