Sinarmas Land privatisation offer ‘not fair’ but ‘reasonable’—IFA

They also recommend that shareholders accept the offer.

The $1.32b takeover offer for Sinarmas Land by Lyon Investments has been deemed ‘not fair’ but ‘reasonable’ by W Capital Markets Pte. Ltd, the independent financial advisor (IFA) appointed to advise the company’s Independent Directors.

In March, Sinarmas Land received a takeover offer from Lyon Investments, an entity controlled by Indonesia’s billionaire Widjaja family.

Lyon Investments made a voluntary, unconditional cash offer for all the shares in Sinarmas Land that it does not own at $0.31 apiece, adding that it was making the offer to delist the company from SGX’s mainboard. The company currently holds about 70.3% of the total number of issued shares in Sinarmas Land.

The offer price represents a 12.7% premium over Sinarmas Land’s last traded price of $0.275 per share on Mar 24, before the company called for a trading halt on 25 March.

According to W Capital Markets, it considers the offer ‘not fair’ because whilst the offer price is about 63.6% lower than the company’s net asset value (NAV) per share, Sinarmas Land’s shares have usually traded at a discount. Over the past three years, the average price investors were willing to pay was around 26.3% of the NAV.

Compared to similar property companies in Indonesia, the price offered for Sinarmas Land values it at about 0.36 times its NAV. This falls within the industry range, from as low as 0.16 times to as high as 7.5 times. The offer is slightly above the median (middle value) of 0.35 times but below the average (mean) of 0.41 times.

For comparable companies in Singapore, the offer values Sinarmas Land at 0.36 times its NAV,, which is within the range of 0.24 to 0.58 times. This is above the median of 0.33 times but below the mean of 0.37 times.

When looking at earnings-based valuation multiples, the Group's Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortisation (EV/EBITDA) ratio of 4.8 times falls within the range of both Indonesian and Singaporean companies. It matches the mean for both groups but is below the median for Indonesian companies and lower than both the median and average for Singaporean companies. The Group’s adjusted Price-to-Earnings Ratio (PER) of 5.3 times is higher than both the average and median for Indonesian companies but falls outside the range of similar companies in Singapore.

The offer price was also below the IFA’s estimated range of S$0.350 to S$0.361 per share.

However, W Capital Markets noted that the offer price of $0.31 represents a premium of about 16.5%, 0.5%, 5.6%, and 17.1% over the 12-month, 6-month, 3-month, and 1-month volume-weighted average prices (VWAP) of the shares, respectively, up to the last full market day.

Additionally, since the offer announcement, shares have closed above the offer price every day, with the VWAP standing at -$0.325.

The premiums implied by the offer price, 12.7% over the last transaction price and 17.1% over the 1-month VWAP, are also consistent with those seen in prior privatisation transactions that were considered fair and reasonable.

While the offer price premiums align with those seen in previous property privatisation deals, the price-to-net asset value (P/NAV) implied by the offer is lower than in similar transactions.

W Capital Markets said that ‘the likelihood of competing offers is remote’.

“We advise the Independent Directors to recommend shareholders to accept the offer. Shareholders who wish to realise their investment in the company can choose to sell their shares in the open market if they can obtain a price higher than the offer price, after taking into account all transaction costs with open market transactions,” W Capital Markets said.