In this briefing:
- OUE Commercial REIT & Hospitality Trust Merger Proposed
- Lynas Investor Briefing – Looks Like More Capex Ahead
- DHICO Rights Offer: Current Status & Trade Approach
- Nexon Sale: Nexon Japan Tender Price Estimations
- GrainCorp: Demerger Underpins the Share Price but a Second-Best Option
1. OUE Commercial REIT & Hospitality Trust Merger Proposed
After a WSJ article on Sunday suggesting as much, Monday morning 8 April 2018 saw the announcement of a Proposed Merger between OUE Commercial Real Estate Investment Tr (OUECT SP) and OUE Hospitality Trust (OUEHT SP) whereby OUEHT unitholders would receive a combination of cash and OUECT shares (S$0.04075 + 1.3853 shares of OUECT) for every share of OUEHT held. Investors in each would receive any “permitted distributions” (dividends, etc) declared by the respective managers in respect of the period from 1 Jan 2019 up to the day immediately before the date on which Trust Scheme becomes effective.
This would create a REIT with S$6.8bn of assets, a pro-forma market cap of ~S$2.9bn, and a free-float of S$1.1bn (up by 57%). OUE Group would continue to own 48.3% of the total.
The benefits to investors would be increased scale (2.2mm square feet of commercial net lettable area, + 1,640 hotel rooms), more borrowing capacity, increased diversification as asset concentration would be lowered, and because the scope of NewREIT would be broader, it would allow REIT managers more flexibility. The above-mentioned points are advertised as being the fodder for a re-rating. The idea of possible index inclusion is mooted as well.
The OUECT presentation says that the merger is “DPU accretive to unitholders” (+2.1% on a 2018 pro-forma basis) while the OUEHT presentation says that the merger is “value accretive to stapled securityholders” (+18.7% NAV uplift per stapled security).
Details of how this all works below.
Separately, two other Singapore deals announced at the end of last week include:
Kingboard Laminates Hldgs (1888 HK) buying out Kingboard Copper Foil (KCF SP) discussed in Kingboard Starts Voluntary Unconditional Offer for 88% Held Sub Kingboard Copper Foil
China Everbright (165 HK) announces an MGO for Ying Li International Real Estate Ltd (YINGLI SP) as discussed in Everbright Mandatory Offer for Ying Li Intl Real Estate – Going Cheap
To accompany these, there is a Quiddity Singapore M&A Guide 2019.
2. Lynas Investor Briefing – Looks Like More Capex Ahead
At noon Sydney time Lynas Corp Ltd (LYC AU) held an investor briefing by webcast regarding comments made by the Malaysian Prime Minister in his first cabinet press conference on Friday 5 April 2019. Those comments were noted in the ASX regulatory update.
3. DHICO Rights Offer: Current Status & Trade Approach
This post looks at the current trading status of DHICO rights offer on each of the major movement days. It still seems that the share price should be kept high to give the Mar 25~26 arb traders an opportunity to short. This explains recent strong prices. It is presumed that shorting hasn’t been fully done. About half is still to be shorted. This suggests that strong prices should be kept a little longer. Once this is done, we will likely see a strong downward pressure until the price hits ₩6,250. This sets the floor price at ₩5,000. This will be good time to do one-way shorting.
4. Nexon Sale: Nexon Japan Tender Price Estimations
This post estimates Nexon Japan tender price. For this, I use the same approach that a local PE named “MBK Partners” would use based on EBITDA multiple and IRR on a 3 year exit. From their position, the only proven value-up path would be KOSPI moving. MBK must try to stay as conservative as possible. Whatever Netmarble value addition should be an extra when deciding on a tender price. So, I base my estimation solely based on KOSPI moving effect. For this, I use NCsoft as a sole valuation comp.
5. GrainCorp: Demerger Underpins the Share Price but a Second-Best Option
Graincorp Ltd A (GNC AU) said on Thursday it plans to spin off its malting and craft brewing distribution business (MaltCo). The proposed demerger, which will complete at the end of the year, would result in two independent ASX-listed companies – MaltCo and GrainCorp’s Grains and Oils businesses (New GrainCorp).
In the absence of an LTAP binding proposal, the GrainCorp Board to their credit has proposed an alternative way to create shareholder value or at least minimise a share price fall. Unfortunately, the proposed demerger is unlikely to be superior to the LTAP proposal, in our view.
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