Dissenting voices in Selangor Properties’ privatisation offer, says report

KUALA LUMPUR (Oct 27): Not all shareholders are happy about the Wen family’s plan to privatise Selangor Properties Bhd at RM5.70 last Thursday, reported The Edge Malaysia.

Pangolin Investment Management, which holds a 1.24% stake in Selangor Properties, thinks the offer price is too low.

“We deem the offer as unfair. The offer price ...  is still a 20.7% discount to the company’s book value as of July 31, 2018, of RM7.19 per share,” Pangolin founder and director James Hay said in an email to the weekly.

Hays also said that since Selangor Properties is the biggest owner of prime real estate in Damansara Heights, he believes the shares are worth as much as RM12.22 based on Pangolin’s realised net asset value estimates.

Pangolin values the 30.71 acres of the group’s land/properties in Damansara Heights at RM1,400 psf, “which works out to a total market value of RM1.87 billion”.

By comparison, Selangor Properties recorded a net book value of RM408.2 million for the same properties and land as at October last year, according to its 2017 annual report.

Records showed that Selangor Properties sold 6.34 acres of land in Pusat Bandar Damansara to Tan Sri Desmond Lim Siew Choon’s Jendela Mayang Sdn Bhd at RM450 million in 2014 for the Pavilion Damansara Heights development. This valued the land at RM1,627 psf. 

It was reported that the 2014 deal was concluded at “a time when land and property prices were at a peak”. An industry expert said a more realistic figure currently would be closer to RM1,200 psf.

This means the market value of the group’s land in Damansara Heights alone could be between RM1.6 billion and RM2.14 billion. 

Hay also said that is Selangor Properties cash rich: financial statements showed that it had net cash and cash equivalents of RM264.2 million as at end-July 2018.

Pangolin said that this above amount “should include financial assets of up to RM702.92 million”, which can be easily liquidated and calculates that the group has a net cash pile of RM711.5 million as at July 31, 2018.

According to reports, Kaiyin Holdings Bhd controls the biggest stake of 68.23%, followed by Credit Suisse Group AG and ValueCAP Sdn Bhd (equally owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and Kumpulan Wang Persaraan (Diperbadankan)).

Kaiyin Holdings is the private vehicle of the Wen family.

Kaiyin Holdings said in a letter that the privatisation plan “comes against the backdrop of a subdued property investment and development landscape”.

“The number of unsold high-rise residential properties, combined with the oversupply of commercial properties and new developments, such as Damansara City and Pavilion Damansara Heights around the group’s existing properties, would not only drive vacancy rates high and depress effective rental rates of its existing investment properties, but will also limit the group’s development activities, especially on its landbank in Damansara Heights in the short- to medium-term,” it said.