Global Logistic Properties (GLP SP) - UOB Kay Hian 2017-07-17: Privatisation Offer A Fair Deal

Global Logistic Properties (GLP SP) - UOB Kay Hian 2017-07-17: Privatisation Offer: A Fair Deal GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties (GLP SP) - Privatisation Offer: A Fair Deal

  • We recommend taking up the offer as it is above our target price of S$2.75. The offer price of S$3.38 is at parity to GLP’s RNAV/share and the offer premium of 25% is in line with past property privatisation transactions. 
  • The deal will bring other privatisation plays back in focus, including Wheelock, GuocoLand, Wing Tai, Ho Bee and Hiap Hoe
  • The potential GLP delisting will benefit other indexed property stocks with CapitaLand as a key beneficiary as fund managers seek alternatives to allocate property funds.



WHAT’S NEW


Privatisation offer. 

  • Nesta Investment Holdings Ltd, owned by a consortium comprising HOPU (21.3%), Hillhouse Capital (21.2%), SMG (21.2%), Bank Of China Group Investment (15%) and Vanke (21.4%), has made a cash offer to privatise Global Logistic Properties (GLP) under a scheme of arrangement.
  • The offer price of S$3.38/share, at a 25% upside to the closing price of S$2.70 on 12 July, is 1.3x GLP’s book value of S$2.60/share and at parity to its RNAV of S$3.39/share.
  • GIC, as the single largest shareholder (36.8% stake), has provided an irrevocable undertaking to the offeror to vote in favour of the scheme.
  • Following the independent strategic review process, the independent directors made a preliminary recommendation to shareholders to vote in favour of the scheme, which is expected to be completed on or before 14 Apr 18.


STOCK IMPACT

  • We recommend taking up the offer as the offer price is above our target price of S$2.75. 
  • The offer will not be reduced by the proposed cash dividend of S$0.06/share announced on 19 May 17.

Offer premium in line with past property privatisations. 

  • Property stocks privatised over the last 10 years in Singapore included: 
    1. Sim Lian (Aug 16) - privatised by a consortium led by the founder of Sim Lian Group at a 14.9% premium over the last traded price, 
    2. Keppel Land (Jan 15) - privatised by Keppel Corp at a 20% premium to the last traded price, 
    3. Singapore Land (Feb 14) - privatised by UIC at an 11.2% premium to the last traded price, 
    4. SC Global (Dec 12) - privatised at a 49.4% premium to the last traded price, 
    5. Allgreen (May 11) - privatised by Kuok Group at a 39% premium to the last traded price, 
    6. MCL Land (Aug 10) - privatised by Hong Kong Land at a 25% premium to the last traded price, and 
    7. SoilBuild (Sep 10) which announced plans for a voluntary delisting at a 13.5% premium over the last traded price. 
  • The average premium to the last traded price was about 26%, in line with the offer for GLP.

Privatisation plays back in focus. 

  • We believe that the deep (30-40%) trading discounts, low borrowing costs and the government policy overhang in the residential sector will draw investors’ focus on other privatisation candidates, including Wheelock, GuocoLand, Wing Tai, Ho Bee and Hiap Hoe. These stocks high major shareholder stakes, low public float and trade at deep discounts to their RNAVs.

Other indexed property Index stocks to benefit from rotation. 

  • The potential delisting of GLP would benefit other indexed property stocks, including CapitaLand, City Developments, Ascendas REIT and CapitaMall Trust, as fund managers seek other property counters to allocate property funds. 
  • CapitaLand is likely to be a key beneficiary due to its similarities with GLP in exposure to China.


VALUATION/RECOMMENDATION

  • We raise our target price to the offer price of S$3.38 (from S$2.75).


SHARE PRICE CATALYSTS

  • Growth in domestic consumption underpinning logistics demand.
  • Visibility in strategic business review.




Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-07-17
UOB Kay Hian SGX Stock Analyst Report ACCEPT OFFER Maintain HOLD 3.38 Up 2.750



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