Wheelock Properties (S) Ltd - OCBC Investment 2018-09-25: Wake Me Up Before You Go-GO

SGinvestors.io

WHEELOCK PROPERTIES (S) LTD SGX:M35

Wheelock Properties (S) Ltd - Wake Me Up Before You Go-GO

• Final offer price (S$2.10/share).
• Final closing date (2 Oct 2018).
• Two-tiered recommendation.

Final offer price and final closing date

• Regarding the voluntary unconditional general offer (GO) from Wheelock & Co (20 HK), the Offeror has announced both a final offer price (S$2.10/share) as well as a final closing date (5:30PM on 2 Oct 2018).
• Below we discuss various options open to shareholders.

Option 1: Accept the offer

• Shareholders may choose to accept the offer. S$2.10 in cash represents a premium of 20.7% over the last transacted price prior to the announcement. 
• Meanwhile, the open market price has corrected 3% from S$2.17 as of 21 Sept to S$2.10 as of 24 Sept’s close after the latest announcement.

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Option 2: Wait for a Vard repeat

• Given the relatively low offer price, shareholders may also decide to reject the offer in anticipation that the Offeror will return with another General Offer at a higher offer price six months or more after the close of the first General Offer. In this instance, shareholders may look to Vard Holdings (SGX:MS7) as an example of an ongoing privatization case which has seen two General Offers by the same offeror (see appendix in PDF report attached). 
• Ultimately, the probability of 20 HK coming back with another General Offer and a higher offer price depends on
  1. how many shareholders decide not to accept the offer this time around (which can be monitored through dealings disclosures), and
  2. how eager the Offeror is to delist WPS.

Option 3: Acceptances increase Offeror’s stake to 90% or above

• Should the Offeror’s stake reach 90% before the offer closes, there are two things to note:
  1. the Offeror will have a right to compulsorily acquire remaining shares at S$2.10/share and
  2. even if the Offeror does not exercise this right, remaining shareholders (who did not accept the offer prior) will have the right to require the Offeror to acquire their shares at the last offer price.

Our recommendation: Depends on when you bought

• Given the substantial gap between our fair value estimate and the offer price, we previously encouraged investors to Reject the Offer. This sentiment was echoed by other brokerage houses with some suggesting “fair” offer prices that were higher than our own fair value.
• We continue to see the offer price as low relative to our fair value. At the same time, we also recognize that the General Offer presents a unique opportunity for shareholders to realize a profit in a very short period of time. As such, we have a two-tiered recommendation.
  • For shareholders who are in-the-money, we recommend accepting the offer (Option1) to switch to other more attractive opportunities like CapitaLand (SGX:C31) and UOL Group (SGX:U14).
  • For shareholders who collected WPS after the current General Offer announcement (at more than S$2.10), we recommend waiting out for a second and better general offer (Option2), though there are also risks associated with this.
• See our appendix in PDF report attached for more details.

Deborah Ong OCBC Investment Research | https://www.iocbc.com/ 2018-09-25

SGX Stock Analyst Report REJECT OFFER Maintain REJECT OFFER 2.340 Same 2.340