UIC has made a privatisation offer for SingLand of SGD9.40 per share (including dividend of 20.0 cts per share).

The offer price translates to a 28% discount to its latest book value of SGD13.07 and a 25% discount to our RNAV estimate of SGD12.58, which is narrower than the discounts of most other Singapore developers (40-50%).

We think the offer is fair and attractive, considering SingLand’s lack of trading liquidity and positive catalysts. We advise shareholders to accept the offer.

What’s New

UIC (UIC SP, unrated) has made a privatisation offer of SGD9.40 per share for the 19.6% of outstanding shares it does not already own. UIC currently has an 80.4% stake in SingLand. The rationales for the proposed privatisation include SingLand’s poor trading liquidity, greater financial flexibility for UIC upon privatisation of SingLand and to reduce listing costs.

What’s Our View

We believe that the delisting of SingLand could well be the first step for more corporate activity at the UIC level, since approximately 80% of UIC’s value comes from SingLand alone. Upon privatisation of SingLand, we think that UIC will then look into how to unlock value for its own shareholders, potentially via a privatisation of its own, or monetising the commercial assets possibly through a REIT.

We think the offer may be attractive enough for the second-largest holders, Silchester International Investors which has an 8.2% stake. Should Silchester accept the offer, UIC needs only to acquire another ~1% from the minorities to trigger a delisting.

Given that the offer represents a 15% upside from our previous fair value of SGD8.20, we raise our TP to SGD9.40 pegged to the offer price and advise shareholders to accept the offer.  HOLD.

Source: Maybank Kim Eng Research - 25 Feb 2014