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Here's to 2012
Here's another of my favourite.....
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And According To Dunno What Sources, Box-Pak Will.....
According to the UNKNOWN sources, a DEAL is BELIEVED to happen....
The share soars on the news.
Company denies the story. Share plunges.
Rinse... Wash... and REPEAT!
Yeah, babe.... nothing wrong here... just our local singing out these market sources songs.... and the market dances to the tune....
Very fun... and who knows.... who is making and who is losing money out of such spins.
Another day.... in our local stock market.
Check this out: Box-Pak awakened by possible takeover? (from the Edge Malaysia)
- Box-Pak awakened by possible takeover?
Thursday 29 December 2011
KUALA LUMPUR: Shares of usually sleepy paper box and carton-maker Box-Pak (M) Bhd gained over a third in two days to hit its highest in 14 years yesterday, even as industry sources speak of a potential acquirer.
Tokyo and Osaka-listed Oji Paper Co Ltd (Japan), Japan’s largest paper company by sales, is believed to be the offeror, market sources said.
Box-Pak officials were not available for comment at press time.
Adding 37 sen or 17.6% to close at its day-high of RM2.47 yesterday, Box-Pak gained 33.5% in the two days after the Christmas weekend. The 2.81 million Box-Pak shares that changed hands yesterday were roughly 10 times the 30-day average volume of 284,950 shares and 100 times its five-year daily average volume of 26,700 shares.
Market watchers see Oji Paper — which has bought three Malaysian paper-related companies since 2010 — Genting Sanyen Industrial Paper, United Kotak Bhd, and HPI Resources Bhd — as a likely suitor for Box-Pak.
An offer may come through its wholly-owned Malaysian arm, Oji Paper Asia Sdn Bhd (OPA), the investment holding vehicle that acquired both United Kotak and HPI Resources, one source said.
To recap, Oji Paper in March last year bought 100% of Genting Sanyen Industrial Paper, a paper and packaging company that was formerly part of the Genting group, from private equity firm CVC Asia Pacific for an undisclosed amount.
December last year, OPA acquired United Kotak for RM1.40 per share at 10.9 times price- earnings ratio (PER) and one times price-to-book value (P/BV). In June this year, OPA offered RM4.40 per share for HPI Resources, which translates to 1.48 times book and 8.82 times earnings.
In comparison, Box-Pak’s closing price of RM2.47 yesterday values the company at 9.98 times PER and 1.32 times P/BV. Net assets per share stood at RM1.87 as at Sept 30.
According to Box-Pak’s FY10 annual report, Kian Joo Can Factory Bhd is its largest shareholder with a 54.83% stake, followed by Amanahraya Trustees Bhd with 5.16%. Kian Joo’s shares rose five sen or 2.42% to RM2.12 yesterday, up 31.4% year-to-date.
OPA did not appear to hold any shares in Box-Pak at the time of writing.
OPA’s conditional takeover offer for United Kotak came on Oct 12 last year, but not before the latter’s share price rose 66.6% from an average price of 73 sen in June 2010 to RM1.22 by Sept 30. Similarly, HPI Resources’ share price jumped 27.18% from RM3.09 to RM3.93 in one week leading up to OPA’s offer on June 15.
Notably, though, a July 13 report by The Edge Financial Daily that paper milling and packaging firm, Muda Holdings Bhd, could be Oji Paper’s next takeover target, was denied by Muda the same day.
- Box-Pak shares soar on talk of privatisation
By Zaidi Isham Ismail Published: 2011/12/29
Kian Joo Can Factory Bhd is planning to privatise subsidiary Box-Pak (Malaysia) Bhd under a multimillion ringgit deal that will involve certain Japanese firms, sources say.
Kian Joo would pay RM3.20 a share for the remaining shares it does not own in its profitable corrugated carton boxes manufacturing unit, they said.
Meanwhile, Box-Pak shares were the second top gainer on Bursa Malaysia yesterday. The stock soared 37 sen to close at RM2.47 with 2.81 million shares traded. At RM2.47, its market capitalisation stood at RM148.26 million.
Year-to-date, Box-Pak has gained 107.56 per cent or RM1.28, with a low of RM1.09 on March 16 this year. Kian Joo Can owns 32.91 million shares, or a 54.83 per cent stake, in Box-Pak. Another single largest shareholder is Amanah Saham Bumiputera Bhdwith 3.1 million shares or a 5.16 per cent stake.
The sources said Kian Joo Can had hired Maybank Investment Bank Bhd to handle the privatisation deal. Kian Joo Can executive director Datuk Anthony See Teow Guan, when contacted yesterday, denied that it was planning such privatisation.
“No, there’s no truth in it. I don’t know who spread the rumours,” said See, who is also managing director of Box-Pak.
Besides corrugated carton boxes, Box-Pak also manufactures and sells die-cut trays, wrap-around cartons, Point of Purchase (POP) and paper palette for use in the packaging industry.
The company was incorporated in December 1974 and listed on the local bourse on July 18 1996. Box-Pak nearly doubled its net profit in the first nine months ended September 30 2011 to RM10.35 million, from RM5.79 million net profit a year ago.
The company attributed the improved profit to higher revenue and better production efficiency. Group revenue rose to RM178.39 million during the period, up from RM134.73 million previously..
- Friday December 30, 2011
Box-Pak plunges on denial
By CHOONG EN HAN
PETALING JAYA: Box-Pak (M) Bhd's shares plunged 24 sen, or 9.7%, to RM2.23 after its parent Kian Joo Can Factory Bhd refuted media reports that a potential privatisation involving its subsidiary might be on the table.
Shares of the paper box and carton maker reached an intra-day high of RM2.65 in the first trading session and pared its gains in the second session to reach a low of RM2.21 after Kian Joo's denial, with 5.35 million shares traded. Box-Pok was second on yesterday's list of top losers.
In their filings with Bursa Malaysia, both Kian Joo and Box-Pak said they were not aware of any formal discussions concerning the privatisation of Box-Pak.
Kian Joo also refuted allegations that it has hired any investment bank in relation to the said exercise.
A report citing unnamed sources said Kian Joo would pay RM3.20 a share for the remaining shares it does not own to privatise Box-Pak, with the involvement of a Japanese firm.
Kian Joo owns 54.83% of Box-Pak, followed by Amanahraya Trustees Bhd with a 5.16% stake.
Meanwhile, another report speculated that Tokyo and Osaka-listed Oji Paper Co Ltd is believed to be a potential offerer to acquire Box-Pak.
“As far as we know, nothing is happening yet. The only guidance from Japan's Oji is that they will not stop buying assets in Malaysia when the opportunity presents itself,” an industry source said.
Oji Paper was founded in Japan in 1873 as Shoshi Kaisha and was renamed Oji Paper in 1893. Its core business includes the sale of pulp, paper and paperboard such as newsprint, printing and writing papers, speciality papers, container boards and box boards.
In July, it was speculated that Oji Paper is interested in acquiring paper milling and packaging firm Muda Holdings Bhd, which was denied by the company on the same day.
Over the past two years, Oji Paper has been on a shopping spree, snapping up several Malaysian paper-related companies Genting Sanyen Industrial Paper, United Kotak Bhd and HPI Resources Bhd.
Notably, Oji Paper took over packaging product maker HPI Resources in June for RM258mil while it bought into corrugated carton maker United Kotak for RM63mil in February.
Told you so!
Told you so that the stock market game is sooooooooooooo fun!
Making Money The Easy Way Via Envair Holdings
From the Edge. http://www.theedgemalaysia.com/business-news/198283-envair-holdings-active-down-in-afternoon-session.html
- Envair Holdings active, down in afternoon session
Written by the edgemalaysia
Thursday 22, December 2011
KUALA LUMPUR (Dec 22): ENVAIR HOLDING BHD [] shares were actively traded and fell on Thursday after Carpet Raya Sdn Bhd director Deepak Jaikishan ceased to be a substantial shareholder in the loss-making company.
At 2.50pm, Envair fell four sen to 28 sen with 13.96 million shares done.
A filing with Bursa Malaysia on Dec 21 showed that Deepak had disposed six million Envair shares in the open market on Dec 14.
Deepak had emerged as a substantial shareholder in Envair after he acquired a 5.06% equity interest or six million shares in Envair in a direct deal on Dec 2.
( refer Notice of Interest Sub. S-hldr (29A) - Deepak Jaikishan )
On the 14 December, Envair was trading between 34 sen and 38 sen!
Wanna try calculate the cool profits?
How cool is this?
Now consider this also...
On 6 December 2011: Jaikishan buys 5.06% stake in Envair for RM1.32mil
- ............ Envair told Bursa Malaysia that the 39-year old supplier of carpets recently in the news for his link to controversial statutory declarations had bought the six million shares at 22 sen apiece last Friday.
Envair last saw a Chinese national, Jiang Chuan Yi, selling off his entire stake of 6.75% in the company less than a month after acquiring it on Nov 1.
The sale was done via open market transactions at an undisclosed price.
Envair's stock had surged in early October from 11 sen to 40 sen in early November, just before the company unveiled its plans to move into the oil and gas industry by supplying two million barrels of light crude oil monthly for 60 months to a China-based company, An Hong Shenzhen.
The deal surprised analysts who questioned then how a little-known loss-making company could secure such a huge deal from a Chinese party.
Envair shares ended 2.5 sen higher to 31.5 sen yesterday.
The rapid exit of Jiang remains a concern in light of Jaikishan's recent purchase of the 5.06% block in Envair........
On the 10th December, the following was published: Envair gets support letter for financing
- ........ Jaikishan did not divulge from whom he purchased his block of shares, saying only: “I took it as an opportunity to come in on the cheap.”
In an interview with StarBizWeek, Jaikishan, whose family is in the business of carpet trading and property investment, said he bought into Envair based on the company's foray into the oil and gas industry.
“Right now, that's the only reason it is exciting,” he said.
While declining to comment on the profits his personal businesses generated, the 39-year-old businessman said he would like to contribute in terms of finance to Envair.
“But I also want to take an active role in Envair's business. I've met some of its (substantial) shareholders,” he said.
According to Jaikishan, Envair is expected to call for a shareholders' meeting soon to seek his appointment to the board.
He also said he was in discussions to further increase his stake in the company.
“I bought one million shares two to three days ago and another one million today (yesterday) off the market,” he said.
Mohd Anuar declined to elaborate when asked about the emergence of Jaikishan in Envair.
“Yes, I know him,” he said, adding that he (Anuar) himself had no stake in the firm.
For the third quarter ended Sept 30, Envair had a net loss of RM900,000 against a net loss of RM1.29mil a year earlier.
The stock ended 0.5 sen up at 27 sen yesterday.
So on 10 December Deepak tells everyone his bullish views on Star Biz, one of our national newspaper but then on the 14 December, he sold all the shares!!!!!!
And this my friends, is how to make money in our stock market the easy way!
And The Motor Vehicle Sales Is Down And UP...
Here's the Edge Malaysia version:
- MAA: November vehicle sales at 48,702 units, dn 9% on-month
Written by Joseph Chin of theedgemalaysia.com
Friday, 16 December 2011 16:23
KUALA LUMPUR (Dec 16): The Malaysian Automotive Association expects vehicle sales to moderate further in December, extending the decline from November where sales were lower at 48,702 units.
It said in a statement on Friday the November sales were down 4,913 units or 9% from October’s 53,615 units. However, when compared to a year ago, sales climbed 9%.
MAA said the slower sales were also due to the severe floods in Thailand which had disrupted certain makes of vehicles. Of the 48,702 units, passenger vehicles accounted for 42,754 and the remaining 5,948 were commercial vehicles.
“Sales volume for December 2011 is expected to moderate further due to the preference of customers to wait and take delivery of 2012 production year stocks and also the impact of the floods in Thailand may affect supply,” it said.
The trade body said from January-November, total vehicle sales rose marginally to 552,561 units from 550,391 in the previous corresponding period. Passenger vehicles accounted for 492,884 units and the remaining 59,677 units were commercial vehicles.
MAA data also showed that total production in November declined to 35,355 units from 36,265 units a year ago. Year-to-date, it said production fell 4.6% to 501,755 units from 526,194 units in the previous corresponding period.
Here is the Star Biz version:
- Saturday December 17, 2011
Vehicle sales up 8.6% in November
By FARAH FAZANNA ZULZAHA
KUALA LUMPUR: Total vehicle sales rose 8.6% to 48,702 units in November, from the 44,845 units sold in the same month last year, said the Malaysian Automotive Association (MAA).
It also said that November sales were down 9%, or 4,913 units, from October.
However, compared with a year ago, sales in November registered an increase of 9%.
Of the 48,702 units, passenger vehicles accounted for 42,754; the remaining 5,948 were commercial vehicles.
MAA said in a statement that the slower sales were due to the floods in Thailand, which had disrupted the production of certain makes of vehicles.
From January to November, total vehicle sales rose to 552,561 units from 550,391 in the previous corresponding period.
Passenger vehicles accounted for 492,884 units and the remaining 59,677 units were commercial vehicles.
MAA data also showed that November total production declined 2.5% from 36,265 units in a year ago to 35,355 this year.
Year-to-date, it said production fell 4.6% from 526,194 units to 501,755 units in the previous corresponding period.
“Sales volume for December is expected to moderate further and customers are advised to wait and take delivery of 2012 production year stocks and the impact of floods in Thailand may affect supply,” said MAA.
My Dearest Bursa Malaysia And My Dearest Securities Commission
Dear Bursa Malaysia and Securities Commission Boys And Gals,
You invited and you have actively promoted corporate governance recently. You have invited minority shareholders to file their complains against unscrupulous corporates. Yes, if you have a complain, send all your details in and your case will be heard. Yes, I would say kudos to you boys and gals for taking such an initiative. It gives us, the minority shareholders, hope.
However, sadly this morning, I have to ask 'what's the point of hearing without even listening'?
Why am I so disappointed?
I was well aware of my good friend's recent complaint and I was rather impressed that you boys and gals granted a hearing (Mind you, this was a case that happened some three FULL years ago!). But again, what's the point of hearing without even listening?
Rather sad, in my flawed opinion. So a hearing is granted but on the hearing itself, you boys and gals came prepared in a team but instead of trying to understand and listen to the major issues pointed out in the complaint, you boys and gals were rather eagerly prepared not to listen and instead were more focus on dismissing the case. So sad. Did you really understand what the complaint is all about and why the complaint is such importance? Ironically, the complaint focused on the very topic you boys and gals were actively promoting; ie CORPORATE GOVERNANCE!
I wondered the past couple of days thinking how Bursa Malaysia can attract more investors (esp foreign investors)? You invite foreign investors to invest and when they have a legitimate complain, you boys and gals were not really interested to listen.
And the sad outcome of this lopsided hearing?
You boys and gals won!
Congratulations!
The complaint is now officially withdrawn!
Here's the letter written by M.A Wind (who is a foreign investor!!!! ): Withdrawal of complaints with SC & BM
- "Dear Sir/Madam,
In light of the extremely disappointing performance of the authorities (most notably Bursa Malaysia) on my complaints regarding Bumi Armada and Maybulk/POSH, not seeing even a sliver of justice being done after stonewalling me in both cases for a full three years, with Bursa Malaysia being an interested party having approved all the documents in the first place and now having to check their own work (and thus not surprisingly approving it), I herewith withdraw all my complaints with SC/BM.
It is better to have no justice at all and it being painfully obvious, than to get a half-baked effort after 3 full years that would not even count as an slap on the wrist and some people boasting of actually having done their job.
I also don’t have the energy or the time to be involved in a process that leads to absolute nowhere.
Regards, M.A. Wind"
- After the damage has been done (the RPT deal went through), SC/BM will look into possible complaints. My experience is that these investigations will go nowhere, I haven’t heard of a single complaint by a Minority Investor ever being approved. Normally SC/BM will drag their feet for a long time (often a few years), stonewalling the Minority Investor, changing the manager in charge many times and then answer with a one line reply that no rule has been breached. No reason will be given, no transparency at all. Investigations have to be conducted confidentially, this is of course correct, but SC/BM is abusing this rule very much. For instance there is no reason whatsoever not to reveal publicly available information why a complaint or argument is not valid. If somebody provides detailed information which rules are broken, then the SC/BM should be able to counter these arguments without breaking the confidentiality of the research. It is extremely disappointing (to say the least) to spend a huge amount of time writing a complaint with all the information gathered, doing all the work for the SC/BM, coming up with large amounts of supporting documents and then to be treated like this. Unfortunately, I have never heard of a different experience. SC/BM has a (very) bad image and most retail investors don’t even bother anymore to file a complaint with them, is my experience.
I can see the following reasons for the highly unethical and unacceptable behaviour of SC/BM:
(a) SC and BM might be pressured not to take action. For a long time there was suspicion regarding legal matters. Since the publication of the Lingam tape I think no person will have doubts anymore about what might be going on.
(b) SC and BM are not actually pressured in certain cases but think they are and act accordingly. This is an argument that is often brought forward to explain curious verdicts of judges that make no sense at all. The previous Chairman of the SC was (when he retired) asked by a journalist if he had instructions from above not to take action in certain corporate cases. The Chairmen said he wasn’t. Unfortunately, during his tenure the SC didn’t solve any major case (except of course for the usual illegal future trader and ticking off some small corporate players) although he inherited a huge amount of very large cheating cases of the 1997/98 crisis. Nobody dared to say that the Emperor was wearing no Clothes.
(c) SC and BM have already approved certain parts in the process, to agree with a complaint means admitting that they made mistakes in the past. Organisations that “police” their own actions will hardly ever take any action against their own people and the SC/BM seems to be no exception. There is really a need for an organisation totally independent from SC/BM to look into these cases.
(d) It is the "lazy" alternative, it means the manager doesn’t have to make investigations, interviews, research etc. Since the SC/BM doesn’t give any insight in on-going investigations (in itself understandable, but it is easily abused) and the SC/BM never gives any reason for its rejection, it can never be accused of making a mistake in the reason given. No transparency at all of course, but nobody seems to care.
(e) It has become the norm, for 20 years SC/BM have toed the line, why change?
(f) The personnel of SC/BM is simply not (always) up to the task and are not able to counter the army of fancy, well-paid advisors the Majority Investor has hired to defend his case. If this is the case, SC/BM should be allowed to use external advisors, but that would mean admitting that SC/BM is not up to the task and that will not be easy.
In my posting about recommendations I came with the following suggestions:
A small, fast moving, high-powered, totally independent commission to be formed, which will look at complaints (besides other issues).
The top management of SC and BM should make it very clear to all their employees that in the cases of GO’s and RPT’s Minority Investors have clearly the benefit of the doubt, not Majority Investors.
All complaints (except very rare, difficult cases) should be handled well within one year, with quarterly updates. A final answer will be provided containing information publicly available.
In general, SC and BM really should genuinely start to reach out to retail investors, bloggers etc, they can provide useful insights in corporate affairs, since they are putting their money where their mouth is. There are about 1,000 listed companies, much too much for SC and BM to keep tabs on.
I hope you boys and gals really make an effort to listen. Please.
Thanks,
Merry Christmas and A Happy New Year
----------------
Footnote:
For those interested in M.A Wind's complain against Maybulk , do read the following posting:
- SC & BM: (perceived) Conflict of Interest?
- Maybulk/POSH: What happened to the Cash? * Fully recommended reading!*
- Clarkson, the valuer who didn’t believe his own valuation * Fully recommended reading!*
- Maybulk/POSH: KPMG's "independent" advice
- Maybulk: before and after POSH
The KFC Takeover And The Power Of The Source
On Business Times this morning:
- JCorp to take QSR Brands private?
Francis Fernandez and Azlan Abu Bakar Published: 2011/12/14
The exercise is imminent ... it could be as early as this week, says a source
Johor Corp Bhd (JCorp) plans to take QSR Brands Bhd private, people familiar with the matter said yesterday.
The deal may also involve KFC Holdings (M) Bhd, the source said.
“The exercise is imminent ... it could be as early as this week,” said a source.
At least two independent sources told Business Times that a deal was in the offing.
JCorp owns 53 per cent of Kulim Bhd, which in turn owns some 57.5 per cent of QSR. QSR, in turn, owns 50.6 per cent of KFC, the country’s top fast food operator.
“The deal could be done at the Kulim level, but JCorp is the driver for the exercise,” the source said.
Top executives of Kulim and QSR, however, said they had no knowledge on the matter.
“We at the operations side are not involved. We know nothing about it so we can’t give any comments,” QSR managing director Jamaludin Md Ali said, when contacted yesterday.
Kulim managing director Ahamad Mohamad also said he had no knowledge of the matter and declined to comment.
An insider in Kulim, meanwhile, said the matter had never been raised at the Kulim board level.
In April this year, the Malay Chamber of Commerce offered to buy stakes in Kulim through its Johor chapter.
The offer came months after Tan Sri Halim Saad had attempted to buy QSR’s business for RM1.62 billion.
The offer, which had valued QSR shares at RM5.60 a piece, was eventually turned down by the ultimate owners of QSR.
Halim’s November 2010 offer was not the only one on the table, as a slew of foreign firms, including venture capital companies, were said to have shown interest in QSR.
The Carlyle Group had offered RM6.70 a share to gain a 100 per cent control of QSR.
Others said to be interested in QSR at that point of time were CVC Capital Partners Asia Pacific, and even, perhaps, Kohlberg Kravis Roberts & Co, foreign reports suggest.
QSR is a much sought-after asset as whoever controls the company will have control over KFC.
KFC has franchises in Malaysia, Singapore, Brunei, Cambodia and India.
It also operates the home-grown RasaMas chain of restaurants and Ayamas kiosks, while QSR operates some 260 Pizza Hut restaurants in Malaysia and Singapore.
QSR shares closed 10 sen higher to RM6, while KFC shares closed 6 sen higher to RM3.41 yesterday.
- Johor Corp, CVC Capital launch takeover of QSR, KFCH
Written by Joseph Chin of theedgemalaysia.com
Wednesday, 14 December 2011 18:49
KUALA LUMPUR (Dec 14): Johor Corporation and CVC Capital Partners Asia III Ltd have teamed up to take over QSR BRANDS BHD [] and KFC HOLDINGS (M) BHD [] (KFCH).
Johor Corp and CVC Capital had on Wednesday, made the offer via a special purpose vehicle Massive Equity Sdn Bhd (MESB) in which Johor Corp holds a 51% stake and CVC Capital 49%.
MESB offered RM6.80 for the shares in QSR Brands Bhd and RM3.79 for the warrants. At RM6.80, this is 80 sen above the closing price of RM6 on Tuesday while the offer price for the warrants was a premium of 77 sen from the closing price of RM3.02.
MESB also made an offer to KFCH of RM4 per share and RM1 per warrant. At RM4, this was 59 sen above the closing price of RM3.41 on Tuesday but five sen below the closing price of RM1.05.
The securities were suspended from trading on Wednesday and resume on Thursday.
Johor Corp owns 55.9% of KULIM (M) BHD [], which, in turn, owns 53.9% of QSR. QSR has a 50.93% stake in KFCH.
Analysts had earlier expected only Johor Corp to take over QSR and KFCH and this did not include CVC Capital’s participation.
“By taking QSR and KFC Holdings private, Johor Corp would have more control and direct ownership over the cash flows and dividends of the crown jewels, KFC and Pizza Hut. QSR and KFC Holdings generate strong operating cash flows of RM250m million to RM300 million per annum but Johor Corp only get to enjoy less than half of it given their current stakes.
“A buyout of QSR and KFCH would increase the amount of dividends and cash flows that Johor Corp enjoys from this top fast food operator,” a research house said.
In December last year, Johor Corp had stated it has no plans to sell its prized assets, QSR and KFCH, which are held through its subsidiary Kulim.
Its president and chief executive Kamaruzzaman Abu Kassim had then said JCorp entered the quick service restaurants business in 2006 (through Kulim’s investment in QSR) and since then has seen tremendous growth in revenue and profit before tax (PBT) at an average of 13.8% and 3.7% per annum respectively.
“The results from this segment had contributed significantly, making up 47.5% and 44.1% respectively to Kulim’s revenue and PBT in the financial year ended Dec 31, 2009.
“It does not make sense to sell our core business,” he had then said in a statement.
Keyword: YESTERDAY ..... !!!!!
WTH!!!!!!
Another shiny day for Corporate Malaysia!
Sigh!
Featured Article: Rights issues by REITs a tough sell?
On the Edge: http://www.theedgemalaysia.com/in-the-financial-daily/197658-rights-issues-by-reits-a-tough-sell.html
- Rights issues by REITs a tough sell?
Written by Chua Sue-Ann
Monday, 12 December 2011 11:26
KUALA LUMPUR: It remains to see whether investors will warm up to recent proposals by Malaysian real estate investment trusts (REITs) to embark on rights issues for fundraising.
This comes as Hektar REIT and AmFirst REIT separately proposed rights issues in recent months. The former is doing so to fund new asset acquisition while the latter is seeking to reduce its bank borrowings. CapitaMalls Malaysia Trust (CMT) also recently told The Edge Financial Daily that it is considering a rights issue to raise fresh capital.
Analysts and market observers said it is generally undesirable for REITs to embark on rights issues as investors expect dividends from REITs instead of having to plough in more capital.
“Effectively, they are asking investors to spend more on their stock in these uncertain market conditions,” said a property analyst.
However, judging from the price performance of both Hektar REIT and AmFirst REIT, investors have not reacted negatively to the news. This, surprisingly, is in contrast to investors’ harsh treatment of Singapore-listed REITs that embarked on rights issues.
According to analysts, the reason why Malaysian REITs are now turning to rights issues to raise funds, instead of the usual way of borrowing or unit placement, could be because their gearing is already near the 50% threshold (of total asset value) permitted for a REIT to borrow, or that the capital they seek to raise is larger than what can be achieved with a placement exercise.
In Hektar REIT’s case, its gearing ratio is 43.4%, just below the 50% limit, based on its total debt of RM347 million and total assets of RM799.47 million as at Sept 30. AmFirst’s REIT’s gearing as at Sept 30 was 39.8% based on total borrowings of RM419.6 million and total assets of RM1.053 billion.
On Dec 8, Hektar REIT proposed a renounceable rights issue to raise gross proceeds of about RM98.4 million. Proceeds from the rights issue will be used to partially fund the acquisition of two shopping malls in Kedah for RM181 million cash.
Hektar REIT added that it would also obtain bank borrowings of up to RM87.1 million to purchase the assets. Note that it held cash and cash equivalents of RM21.3 million as at Sept 30.
The REIT has yet to finalise the actual number of rights units and entitlement basis will be determined later based on the final issue price of the rights unit.
Hektar REIT added that it will procure a written irrevocable undertaking from its substantial unitholders to fully subscribe for their entitlements, failing which underwriting arrangements would be made.
AmFirst REIT’s proposed rights issue, set on a three-for-five basis, is expected to raise gross proceeds of about RM218.8 million, based on an illustrative issue price of 85 sen per unit. The proceeds are to be used to pare down borrowings.
CapitalMalls Malaysia Trust, which also manages The Mines shopping mall, recently said it is also considering a rights issue to raise fresh capital.
AmFirst said the rights unit issue price is expected to be fixed at a discount of no more than 20% to the theoretical ex-rights price of the unit. “The discount on the issue price of the rights unit is intended to reward unitholders for their continuous support of the fund,” AmFirst said.
Thus far, investors have not reacted negatively to the REITs proposal to conduct rights issues. The unit prices of both Hektar REIT and AmFirst REIT are still traded near their peaks.
“It could be because the unit prices are currently near historical highs, and more interestingly, at the current high prices they still offer rather good yields as well [Hektar REIT at 7.6% and AmFirst at 8.6% historical yield], so unitholders are happy,” said a market observer.
Other than that, he explained that there is still strong demand for REITS in times of market volatility, especially among institutional shareholders.
“Pavilion REIT has gained 13.6% since last week’s IPO to RM1, and the yield is now only 5.7%. So, the management of REITs thought maybe a rights issue is a good idea,” he said.
The scenario is different in Singapore.
K-REIT Asia, a unit of the Keppel Land group, saw its unit priced plunge 9.7% to S$0.857 sen on Oct 18 after it announced plans to raise S$976.3 million (RM2.4 billion) through a 17-for-20 rights issue. Most of the funds raised by the REIT will be used to buy a 87.5% stake in Ocean Financial Centre (OFC) from its parent Keppel Land Ltd.
It was reported that investors didn’t like the pricing for the OFC deal, and the fact that it was a related party deal. It wasn’t entirely because K-REIT Asia had proposed to acquire it via rights issue funding.
“At the end of the day, REIT managements have to justify why they have to do a rights issue to ask for more money from the unitholders. While institutional shareholders are okay with a rights issue, it could be a turn-off for minority shareholders,” said a market observer.
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