KUALA LUMPUR: Asia Pacific Land Bhd (AP Land) has received an offer from major shareholder Low Chuan Holdings to buy its entire assets and liabilities for RM305.2 million or 45 sen per share.

Low Chuan Holdings, which is the investment vehicle of the Low Yat group, holds a 33.98% stake in AP Land, which is involved in plantation and property development.

The proposed acquisition effectively marks the group’s intention to privatise its assets.

Founded by the late Tan Sri Low Yat, the Low Yat group is one of Malaysia’s oldest business outfits and was established before the country’s independence.

The owners of Low Chuan Holdings are Low Gee Tat @ Gene Low, who is also AP Land’s executive chairman, joint managing director Low Gee Teong, Low Gee Soon, Sem Siong Industries Sdn Bhd, Selangor Holdings Sdn Bhd and Low Chuan Securities Sdn Bhd.

According to the announcement to Bursa Malaysia yesterday, Low Chuan Holdings will settle the purchase consideration by way of RM201.52 million cash while RM103.7 million will be treated as amount remaining due and owing to AP Land.

Upon completion of the asset sale, AP Land will undertake a capital repayment to return 45 sen per share to shareholders.

For its stake, the Low family would receive some RM103.7 million which would be sufficient for it settle the amount due to AP Land.

AP Land shares were last traded at 41 sen prior to the announcement.

The offer price of 45 sen is nearly 10% premium over the last traded market price. However, it is probably a bargain basement price compared with its net asset per share of RM1.03 as at Sept 30. This translates into barely 0.44 times book.

Balance sheet-wise, the group is relatively healthy, with net debt amounting to RM49.6 million as at Sept 30, or 7.1% net gearing ratio, according to The Edge Financial Daily’s computation. Its gross cash position amounted to RM165.55 million against debt of RM215.16 million as at Sept 30.

The lacklustre investing interest in the stock is probably due to AP Land’s unexciting earnings. The company has been loss making for five years in the past decade.

For the nine months ended Sept 30, the group incurred a net loss of RM3.03 million or 0.44 sen per share compared with net profit of RM1.8 million or 0.26 sen per share in the previous corresponding period.

The company’s assets are the attraction. It has a relatively asset-rich balance sheet, with land in Malaysia, China and Japan.

Major property projects under its stable include its flagship project at Bandar Tasek Puteri in Rawang, a commercial development project in China’s Changshu City, and a residential development project comprising luxury boutique apartments in the Niseko region of Hokkaido, Japan.

It is worth noting that the bulk of assets in Bandar Tasek Puteri haven’t been revalued since 1995. And now AP Land is constructing an interchange to link its flagship project at Bandar Tasik Puteri to the KLKS Expressway to improve its accessibility.

With this development, the value of the land is expected to grow. Although the land’s lease expires in 2060 and Rawang is not necessary a hot property spot, the land is vast while cost is very low.

Based on The Edge Financial Daily’s calculation, the Bandar Tasek Puteri land under development measuring at 814,957 square metres has a RM84.2 million book value with an effective book cost of RM9.60 per square foot.

The parcel held for development, measuring at 4.22 million square metres with a book value RM174.2 million, has an effective book cost of RM3.84 psf. Judging by its size, the land looks extremely undervalued.

Furthermore, AP Land’s plantation business is going big in East Kalimantan. AP Land is planting another 5,000ha of oil palm with seedlings by end of 2010. To date, some 4,701 ha have  been planted while the first batch of trees will bear fruit from next year onwards.

Will the Low family succeed in the acquisition? Shareholders of AP Land are quite disparate. Aside from the Lows, there are no other major parties. For instance, as at April 30, 2010, the top 30 shareholders controlled only 58.25% of the company’s shares. Most shareholders are individuals with less than 2% stake each. Only one institutional shareholder is listed among the top 30, which is Dimensional Emerging Markets Value Fund with 0.83% stake.

Inh the absence of other substantial shareholders holding over 5% equity stake to block the sale, the Lows may be able to grab the assets cheap.

This article appeared in The Edge Financial Daily, January 12, 2011.