Perennial Real Estate Holdings - CGS-CIMB Research 2020-06-15: Privatisation Offer At $0.95/share

PERENNIAL REAL ESTATE HLDGSLTD (SGX:40S)

Perennial Real Estate Holdings - Privatisation Offer At $0.95/share

Voluntary conditional cash offer of S$0.95/share from Primero Investments Holdings.
Offer price represents a 95% premium to the 12-month VWAP.
We think investors should accept the offer.

Perennial Real Estate Holdings (SGX:40S) announced that it has received a voluntary conditional cash offer from Primero Investment Holdings for all the issued and paid up capital of Perennial Real Estate Holdings at S$0.95/share. See Perennial Real Estate Holdings Announcements. The offer will be extended to all shares including new shares arising from the exercise of employee share option scheme prior to offer closing date, but excluding treasury shares.
The offeror, Primero Investment, comprises of HPRY Hldgs Ltd (wholly owned by Mr. Kuok Khoon Hong), WAC Pte Ltd (wholly owned by Wilmar International), V3 (wholly owned by Mr. Ron Sim), PSG Holdings (wholly owned by Mr. Pua Seck Guan), and Beaufort Investment Global Company Ltd (an entity managed/advised by HOPU Fund Management Company and/or its affiliates).
Major shareholders of Perennial Real Estate Holdings, with total 82.43% stake, have given an irrevocable undertaking to accept the offer. HOPU has agreed to provide shareholders' loan for the amount equivalent to the offer price multiplied by the total number of the offer shares (excluding Undertaking shares) and the amount will be capitalised into offeror shares at the close of the offer.

The offer price represents a 95.1%/112.5%/124.1%/105.2% premium over the 12-month, 6-month, 3-month and 1-month volume weighted average price (VWAP). See Perennial Real Estate Holdings Share Price. The offer price is final and will not be increased.
The offer will become unconditional upon acceptance of not less than 90% of the maximum potential issued capital of Perennial Real Estate Holdings. Once unconditional, the offeror does not intend to preserve the listing status of the company.
As a final DPS of 0.20 Scts had been proposed earlier, the offeror does not intend to reduce the offer price by the amount of final dividend. See Perennial Real Estate Holdings Dividend History. In the event the offer becomes unconditional, the offeror will pay the final dividend amount within 14 days of the receipt of final dividend for shares that have been tendered. Shareholders who receive the final dividend will not be entitled to receive any additional amount from the offeror.

The offer
1. provides an opportunity for shareholders to exit their investment due to low trading liquidity,
2. provides Perennial Real Estate Holdings with greater flexibility to raise capital to support the company's future growth,
3. provides greater management flexibility and
4. reduces the cost of maintaining the listing status.

We have updated our FY20F forecasts to include divestment gains from the sale of Triple One Somerset, partial divestment of AXA Tower and bake in a more challenging operating environment for its retail and hotel properties due to Covid-19.
While we see long-term value in its portfolio of development and completed properties, we think investors should accept the offer as the offer price is close to our RNAV-based Target Price of S$0.99 and the gestation period required to complete its development projects.
See Perennial Real Estate Holdings Share Price; Perennial Real Estate Holdings Target Price; Perennial Real Estate Holdings Analyst Reports; Perennial Real Estate Holdings Dividend History; Perennial Real Estate Holdings Announcements; Perennial Real Estate Holdings Latest News.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-06-15

SGX Stock Analyst Report ADD MAINTAIN ADD 0.990 SAME 0.990