Discover the firms that are most likely to get delisted from the SGX

Property developers dominate the list.

More public firms may opt to get delisted to buck depressed valuations on the local bourse. After Keppel Corp’s privatisation of Keppel Land, RHB predicts that these six firms are the next most likely delisting targets.

"Privatisation often means a windfall for investors as the offeror is likely to offer a decent premium over the last traded price to entice minorities to accept the offer," noted RHB. 

1. United Industrial Corporation (UIC)

UOL has been tightening its grip on this property development and investment firm in recent years. UOL now holds 44% of UIC, and RHB believes that the firm is likely to get delisted at some point in the near future. 

“We think UOL is likely to eventually raise its stake in UIC above 50% through further open market purchases and/or buying over Haw Par’s 5% stake,” stated RHB.

Privatisation will allow UOL to consolidate UIC’s SGD7bn of property assets, many of them investment grade commercial properties and hotels, into its books. This will swell UOL’s asset base to over SGD10bn.

2. Great Eastern Holdings

After two previous attempts at privatising GEH, OCBC is likely to take another shot at delisting its life insurance arm. OCBC tried and failed to take GEH private in 2004 and 2006. However, OCBC’s acquisition of Wing Hang probably delayed the timetable for any potential privatisation move on GEH.

“GE has since grown its life insurance franchise in Singapore and Malaysia steadily, maintaining its market leadership in these two countries. Despite a re-rating in the stock price, valuation for the stock remains undemanding at 1.1x P/EV. We have a TP of SGD28.65 based on a P/EV of 1.3x, suggesting an upside of 15%,” stated RHB.

3. Wheelock Properties (Singapore)

This luxury property developer has been caught wrong-footed by a number of its projects. For instance, the group bought a mass-market residential site in Ang Mo Kio in January 2013, on the eve of a new round of property cooling measures that were announced the next day. It also recently took a write-down for a site it bought in Fuyang, China 3 years ago and another write-down for its Scotts Square retail mall, which is experiencing a drop in occupancy due to a sub-optimal tenant mix.

“Wheelock Singapore is 76% owned by its parent Wheelock & Company (0020 HK), which has a growing property business in China. We think it may privatise Wheelock Singapore and redeploy the excess cash to fund the rapidly growing China business. Based on a 20% discount to its NAV, we think the stock could trade up to a fair value of SGD2.10,” stated RHB.

4. Wing Tai

RHB believes that Wing Tai is mulling privatisation because it will avoid Qualifying Certificate penalties on its luxury unsold projects such as Le Nouvel Ardmore and Nouvel 18 if it gets delisted.

“Major shareholder, the Cheung family, made a successful partial offer in 2012, at SGD1.39 per share, to bring its stake above 50%. With the stock trading at a deep discount of 55% to its latest book value of SGD3.90, the company has been doing active share buybacks and the Cheung family may yet pounce again in a second privatisation attempt,” noted RHB.

5. Ho Bee

Ho Bee is a privatisation candidate because major shareholder Chua Thian Poh owns more than 70% of the stock, and could take the company private if the stock continues to trade at depressed levels.

“The attraction of the stock is its steady, recurring income stream from its portfolio of investment properties in Singapore and London, coupled with management’s proven track record in execution. While its Sentosa projects are currently slow-moving, exposure is limited and the group has earlier made some provisions to writedown its landbank,” RHB noted.

6. Hong Fok

While asset enhancement initiatives have driven up Hong Fok’s net asset value in the past years, its stock price is still trading at a 60% discount.

“We recognise investors’ concerns with management’s past corporate governance practices, but in recent years, it has generally improved. It has dished out a maiden cash dividend, and has committed to continue paying dividends and engaging investors more proactively. We like the value-creation from the asset enhancement initiatives implemented by management, and value the stock at SGD1.05 based on a 50% discount to NAV,” stated RHB.