This article first appeared in The Edge Financial Daily on October 26, 2018
KUALA LUMPUR: The Wen family, which controls a 68.23% stake in Selangor Properties Bhd, is looking to take the company private at RM5.70 per share.
The privatisation will be done through a proposed selective capital reduction and repayment exercise (SCR).
Selangor Properties received a letter from its major shareholder Kayin Holdings Sdn Bhd, which is the vehicle of the Wen family which founded the property group, requesting for the company to undertake a SCR.
The proposed SCR entails a selective capital reduction and a corresponding capital repayment of RM5.70 per share in Selangor Properties held by all the shareholders, except for Kayin.
Under the proposed SCR, the entitled shareholders, who collectively hold 109.17 million shares or the remaining 31.77% stake, will receive a total capital repayment of RM622.27 million, or RM5.70 per share.
As the capital reduction is higher than the company’s existing issued share capital, Kayin also proposes a bonus issue to increase the share capital to a level which is sufficient for the capital reduction to facilitate the proposed SCR, according to the announcement to Bursa Malaysia yesterday.
The proposed SCR is expected to be funded by the company’s internally generated funds and bank facilities obtained by the company.
Selangor Properties’ balance sheet as at July 31 shows that its cash balance stood at RM264.2 million and financial assets (including fixed income investment funds) was at RM702.9 million. Its net asset per share was at RM7.19.
The group owns several plots of prime land and office buildings in Damansara Heights and Bukit Tunku. Among its priciest properties is the 25-storey Menara Milenium in Damansara Heights, which fetched a book value of RM361.93 million, according to its annual report for the financial year ended Oct 31, 2017.
Kayin stated in the 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 land bank in Damansara Heights in the medium- to short-term, it added.
Kayin highlighted the SCR of RM5.70 represents a premium ranging from 19.62% against its one-year volume weighted average price (VWAP) to 40.45% against its five-day VWAP — above the prevailing share price of Selangor Properties.
It pointed out that Selangor Properties shares have not traded at or above RM5.70 since March 2016, and trading liquidity has been low on the open market.
The proposed SCR is subject to approval from shareholders at its forthcoming extraordinary general meeting.
Selangor Properties shares were suspended yesterday. It last closed at RM4.06 with a market capitalisation of RM1.39 billion. Trading of its shares resumes today at 9am.