Can you sell properties like that?

i am referring to private properties

My brother and I walked into a property showroom in Geylang. He got interested in a unit and so I lent my ears to the fantastic arrangement of buying a property.

I thought the arrangement should be - I like what I see at the price that I like, I sign the option to purchase and pay the 5% down payment first.

But the property agency ("Agency") and its agents ("Agent") have a different way of selling properties for the Developer/their client ("Developer"). Here is the process as I understand it. If any property agent is reading this, please feel free to correct me if I am wrong.

1. The Agent stressed that we have NOT officially launched the project and the price list is as SUGGESTED (only tentative/indicative) by Agency.

2. If we are interested in a particular unit, we will write a cheque (5% of SUGGESTED price) to the Developer's account to DEMONSTRATE our interest in that unit. (The Developer/Agency is asking prospective buyers to "shown hand" first in a poker game.)

3. After we wrote the cheque, Agency will put a small orange sticker on that unit. For some units, there were 3 or 4 stickers. Agents will use that "stickered" presentation to demonstrate to the next prospective buyers on the level of "hotness" the project is accumulating.. (I asked the Agent - who verify whether the stickers represent real interest.)

3. There will be a specific launch date, launch time and balloting time as determined by the Developer/Agency. (I am not sure when they decide on this. But if I were the Developer, I guess I will only LAUNCH when my agents have secured 3 or 4 cheques for each unit on offer.)

4. Half an hour before 11.15am on launch day, the Developer releases their FINAL price list. (If I were the Developer, I will obviously launch at a higher price given the many cheques/stickers collected.)

5. Agent will then attempt to call those who have shown their interest with their cheques. Agent's intention is to seek confirmation as to whether to put my brother's cheque into the "lucky draw" to be final purchaser of the unit.. ie. assuming more than one party has shown a willingness to proceed at the HIGHER Developer's price list.

However, if my brother decides not to proceed at the new Developer's price, we have the right to withdraw and the Agent will return the cheque with no further obligation.

6. But should my brother decides to withdraw AFTER being successful in the ballot, a penalty is payable.

7. My brother decides to proceed with the process. Agent sent a SMS to confirm our intention. He affirmed with a return SMS.

What if the prospective buyer did not received the phone call/SMS, Agent said the cheque will be withdrawn from the balloting process. (True enough.. after the balloting, we witnessed a family disputing viciously/vehemently with their Agent/Agency on the lost chance of getting a unit. For some reasons, they did not received any phone call.)

8. Balloting exercise subsequently ensue in the presence of anybody who manage to squeeze into the showroom.

9. For my brother's unit, he was duly informed of being the successful purchaser without any competing interest.

10. Normal sales & purchase arrangement follows. Bankers, lawyers, agent, CPF monies, talking about tiles.. follow.

===============================================
Besides the above, what are my other concerns?

1. Does any Authority need to approve the process of sale?
2. Can the Developer/Agency vary the details of the process during the "soft" launch?
3. What is "soft" launch?
4. Should the sales process be explicitly presented somewhere in the showroom?
5. Our Agent did a good job explaining the process to us. But it is not in black and white.
6. I find it very uncomfortable having to write a cheque to show my interest. I thought a cheque is a promise to pay. You can be sued if that instrument is dishonoured.
7. Isn't Developer and Agency the same party?

===============================================

Paya Lebar site - Damn if you award, damn if you don't

economics of land & building

Situation - Urban Redevelopment Authority (URA) rejected the only bid from a UOL Group-Singapore Land consortium for a commercial plot in Paya Lebar. Reason given -price being 'too low' at $565.74 psf per plot ratio (psf ppr). Compared to the last awarded site in that area in April, it is actually 35% lower than the $872.16 psf ppr top bid in April.


Arguments for and against the award of the tender as follows:-

• The rejection would delay the government's long-term plans to decentralise commercial activity outside the CBD and help ease business costs and reduce congestion.

• URA has to uphold the interest of the nation ie. the secure the maximum disposal value for nation's assets.

• URA has just wasted the bidders' resources in producing a bid without the reserve price being made public prior to the start of tender assuming that price is the sole criteria in deciding an award or otherwise.

• The UOL-SingLand consortium defended their bid price after taking into consideration the prevailing volatile market, unfavourable economic outlook, site's mixed use configuration and the site being technically more challenging as the plot is split into two triangular portions by a section of Geylang River.

• URA may think that there is less urgency NOW for the development of new office space on the island given the ample pipeline supply of over eight million sq ft net lettable area. (But doesn't URA know the stats on office supply and "economic feel" before it put the land up for tender?) 

• Price is not the sole criteria for URA. In late 2007, URA had actually awarded a plot at Marina View at 45% below the price for the next-door plot awarded a few months earlier against a backdrop of escalating office rents then. (So may we know exactly why you have rejected the bid?)

• Had URA awarded the second Paya Lebar plot to UOL-SingLand at a much lower price than the earlier plot, it would put a downward pressure on the rental rate in the area as it can make do with a much lower rental or pricing level. Tenants could also benefit from the lower rental rates.

• Had URA awarded the second Paya Lebar plot to UOL-SingLand, the earlier consortium comprising of Low Keng Huat, Guthrie and Sun Venture Commercial who had paid the higher price in April, would definitely not be happy. (But on willing buyer, willing seller basis, who could they blame?)

• Had URA awarded the second Paya Lebar plot to UOL-SingLand at a much lower price than the earlier plot, it would induce a systemic shock. URA is artificially seen to have helped prop up the market. Good and bad to this, depending from whose point of view you are looking at this.

• But what is/are the criteria of assessing a tender of a site in the "confirmed" list? There are two lists where URA lists sites available for sale. The "confirmed" list consist of sites with no reserve price. The "reserve" list consists of sites with the respective minimum price acceptable to the state being made public. A site on the "reserve" list may send a signal to the market that there is less urgency for its development as compared to those on "confirmed" list. So is it urgent or not urgent for URA to develop the Paya Lebar site or is it just money not enough?

Source - Business Times and Straits Times - Nov 5, 2011.

Is SIA flying out of idea?

By the way its shareholders have structured the company, SIA has a single nature of business ie. to focus on transporting human and cargo. On a more subtle and yet important level, SIA (as also in all govt-linked entities) must represent Singapore as a symbol of excellence with a profitability level to match.

In today's Straits Times, it is reported that SIA is again the 2nd best airline in the world for the last 3 years. SIA even lagged behind in rating for its renowned inflight entertainment system.

SIA has been where it has been over the last 20 years based on a strategy that is deemed impossible as per Michael Porter's Theory of Competitive Advantage. SIA has been able to beat its competitors with innovations and service standards. Innovations and service standards have allowed SIA to achieve highest revenue per passenger delivered at a lowest passenger unit cost. Its passenger unit cost is said to be even lower than that of budget airlines. But the key limiting factor to SIA's growth, in my humble opinion, is the landing rights agreed between two countries. But Airbus A380s helped SIA overcome this limitation by allowing SIA to carry largest number of passengers on the more profitable routes.

Should SIA focus on mergers and acquisition to fuel its growth? SIA does not aim to be largest airline in the world but rather excel in profitability and service quality. But having said that, SIA did attempt some M&A but failed miserably. May I cite ANZ? I am still not sure about the 49% in Virgin but as per SIA's books, the investment has been written off long time ago. We also tried to buy a Chinese airline, an Indian airline.. etc but BLOCKED.

But SIA must continue to be ahead of the curve!! But how?? Under the new CEO, SIA has announced recently that it will enter the budget airline foray officially and wholeheartedly. Could it be a pre-response to AirAsia's massive order placed with Airbus recently? Did SIA hear in the grapevine that AirAsia has a plan to conquer the budget airline world? We will wait and see as the story continues to unfold.

C K Tang - The Valuation Report

ion's valuation - the minority hope to have?

A group of 10 shareholders of CK Tang signed, sealed and delivered a petition to the Singapore Exchange and the Ministry of Finance to protect the interest of the minority shareholders against 89%-majority Tang family's plans to take the company private.

Their main grievance - They are claiming that the flagship 5-storey store (I think, including the basement), which is part of a huge hotel that C K Tang (the listed company) does not own, has been undervalued because the company has not taken redevelopment potential into account.

There are many ways to value an asset. Thus I would be very interested to know how was the valuation done.

How to satisfy the minority shareholders? Based on what I read in the papers today, there are two options.
* Justify your current offer of 83 cents with a vigorously and comprehensively analysed valuation report done by completely independent and competent property professionals, free from any undue influence or opinion from C K Tang's management OR;
* make an offer that at least matches CK Tang's net tangible assets of 93 cents per share as per financial statements dated March 31, 2009 - 10 cents higher than the current offer price of 83 cents.

Will the minority get their report or their money?

P/S - I got no C K Tang shares.

Mr Richard Li and PCCW - Episode 3

engine was running while the driver was yakking away over his coffee

What is the deal?
Mr Richard Li and China Network Communications Group intend to take PCCW private by buying any remaining shares they do not own at HK$4.20 a share. Total purchase consideration - HK$14.9 billion.

PCCW, Hong Kong's biggest phone carrier, will pay a cash dividend of about HK$16.9 - 17.4 billion to Mr Li's Pacific Century Regional Development (PCRD) and China Network within 20 days after the purchase date.

That is about HK$2.7 billion more to be received by Mr Li's and China Network against the buyout price tag.

Couple of hitches

• The intended dividend payout is 13 times more than 2007's.
• 2007's dividend payout is about 74% of 2007's profit.
• PCCW's net debt as at June 2008 - HK$23.2 billion.
• So how does PCCW intend to find the money to pay the intended dividend? PCCW intends to borrow at a relatively high interest from 20 banks to pay it.

Sharholding structure of PCCW before the buyout:-

• Mr Richard Li (in his own name) - 28.3%
• PCRD Singapore - 22.5%
• China Network - 20%

Shareholding structure of PCCW after the intended buyout:-

• Mr Richard Li and PCRD - 66%
• China Network - 34%

So what would be the impact to PCRD's minority shareholders?

Background info
In 2006, Mr Richard Li tried to take PCCW out of PCRD by proposing buyers in the form of companies and parties deemed related to Mr Li Senior and a ex-Citibanker Mr Francis Leung. http://investingwithedgar.blogspot.com/2006/11/richard-li-his-dad-and-pccw.html

Old Wheelock admits mistake...

Wheelock Properties CEO Mr David Lawrence apologised to his shareholders at AGM for having bought a 10% stake in SC Global in June 2007 at $6 per share.

SC Global has since done a two-for-one stock split and the counter closed at 39cts yesterday. Based on my back-of-envelope calculation, this represents a 87% decline in total investment value of $112mio.

This admission of judgement error affirms my view back in 2007 that it was a wrong move by Old Wheelock to have invested. But it was certaintly an excellent piece of business done by Young Simon Cheong to have cashed out at that time.

http://investingwithedgar.blogspot.com/2007/10/merrill-lynch-recommends-sc-global.html

While Old Wheelock said he had made mistake in the past cycle, let us see how he can recover from this one.

A saving grace for Mr Lawrence is that he has done more good than bad for Wheelock. He should be commended for having the guts to admit error.

SCB, was it a shrewd piece of business?

On the July 2, 2008, Standard Chartered Bank stopped an intended 3-week campaign after 2 days given the more than overwhelming response.

What was the campaign about?
SCB advertised on Friday last, to officially launched its campaign from June 27 to July 20, to attract deposits for amounts of $50,000 and above for a 18-month tenure by offering 2.28%.

Ms. Janice Poon, general manager, wealth management, Standard Chartered Bank said they have underestimated the response.

The development has led me to ask a few questions.

1. Was SCB too generous in offering such a "high" interest rate in the current "uninteresting" market environment?
2. Or did SCB know something we don't ie. the cost of money would be higher very soon?
3. Or is SCB in need of the money for a deal urgently?

So will time tell, please?

Enbloc muse - Interest on 5% deposit

Background

In a property transaction, the buyer would place a deposit of 5-10% of the purchase price to the seller. The money is held in trust by the seller's lawyer pending completion of the sale & purchase.

The interest earned on the sum of monies has been kept by the seller's lawyer. [Do they have the legal right to that interest?]

Situation

In this situation that I became aware of, the seller's lawyer has "kindly" agreed to share the interest income on a 50-50 basis with a few hundred sellers of an enbloc property.

Upon the completion of sale and after a few reminders, cheques for the interest income were sent to the sellers. One of the sellers asked for a statement from the lawyer to detail how the amount was derived.

The lawyer said no statement would be issued as the payment was purely made out of goodwill and with no legal obligation.

This seller persisted for the statement as a contract was crystallised [in its opinion] when the lawyer made the offer to share the interest earned on 50-50 basis.

The seller then raised the matter to the Law Society for "help" to secure the statement from its members. The Society said they are not in a position to intervene in a private contract. The seller subsequently changed its position to request the Society to review the conduct of the members in this transaction.

While the seller was in the midst of preparing the paperwork to activate the independent tribunal to review the complaint, the lawyer responded through the Society with the required statement.

Moral of the Story

• Who is legally entitled to the interest earned?


• Is there such a thing as paying out of goodwill for the above situation?


• The interest earned can be "shared". In an enbloc sale, the interest earned could be significant given the size of the transaction and possible long delay due to legal challenges from majority sellers, minority sellers etc etc etc...

"Whose arm did they use?"

When I was told that a Singapore listed company is acquiring another company for $525mio at a valuation of 25x earnings. The price was arrived at on an arm's length, willing-buyer-willing-seller basis. My immediate response was, "Whose arm did they use?"

SNF Corporation, the electronics distributor, has proposed a reverse takeover deal which will see the business of Healthway Medical Services Pte Ltd (HMS) being injected into the listed entity.

SNF will issue 2.6 billion shares in exchange for the ownership to the clinics (doctors and nurses included?) and their future profits.

At 25x PE, I am pretty sure we can buy into blue chips with proven and sustainable income streams. I would be interested in the justifications for the acquisition.

Mr Oei again with Equation and Centillion

Who are the investors?

• Mr Oei Hong Leong
• Mr Eddie Chng, Equation (ex-HeShe)

What is the target company?
- Centillion Environment & Recycling (ex-Citiraya)



Background

• In 2005, Mr Oei and Equation bailed out Centillion by investing $8.05mio each for 37.5% share each of company.


• Centillion also gave both investors the right to buy more shares. Each may buy another 950mio shares for $8.05mio.

On the Tuesday, 17 July 2007,
Both gave notice to exercise that right. Expected settlement on Friday.
Each would then control 42.86% of Centillion.



Looking forward to Friday, 20 July 2007
Assuming Centillion share price hold steady at 20cts, both Mr Oei and Equation are sitting on a paper gain of $364mio each!!!!! (computation as per BT's article)

$8.05mio for $364mio over 2 years!


My sincere respect to you, Mr Oei and Mr Eddie Chng.

Young Simon and Old Wheelock

Still can see Wheelock from here.

What is the transaction?
Wheelock Properties bought a 10% stake in SC Global Developments. Simon Cheong (SC) sold his shares at @$6 for a total value of $112.1mio.

FYI - SC Global closed at $6.45 on Jun 22, 2007.

My objective here is to attempt to understand why the buyer bought and why the seller sold.

Why did Wheelock buy?
David Lawrence, its Chairman and CEO, explained in today's BT ie. 23 Jun.

They think they are buying into good, well-managed companies with a sense of style, and a good brand name.

• It allows Wheelock to buy into property firms that can hold on to land for longer term. Wheelock, though listed in Singapore, is considered a foreign company and thus faces restrictions.
  
• Wheelock has a track record of such investment in the past when it bought 20% of Hotel Properties (HPL) @$1.80 for a sum of $171.4mio. Today, HPL's last traded at $6.15 per share.

My view

Should we tap on the homework done by David Lawrence and its able team of directors and management, in deciding whether we should place our savings with SC Global?

Based on HPL and other successes that Wheelock have logged in todate, I think it is valid to follow albeit for medium to long term view. It will take for SC to fully unlock the full value of the landbank acquired to date. And I really don't think young Simon is in a hurry to do so.

Why did Simon Cheong sell?
No official words from him yet. Thus I hereby speculate.

• To Simon, maybe it is good to bring another brand name shareholder to its stable.
  
• Wheelock's database of buyers could be tapped upon in his attempt to sell SC's projects at $3,000 or more per sq. ft.
  
• Maybe young Simon thinks it is a good time to take some monies off the table given that SC Global's share price has gone up so much. Is he saying that in the near term, $6 plus per share is about right?

My view

Upside could be limited in the near term.

But there will be upside as old Wheelock wanted to buy more but young Simon said 10% divestment is enough.

Irrational Craziness in Ban Joo's share price

"Irrational exuberance," he said.

Here is the continuing episode on Ban Joo based on published information. [P/S - I got no Ban Joo shares.]

Jun 30, 2006 - As at that date, it owed bankers almost $68 million.

Oct 2006 - Auditors expressed doubt about the company's ability to continue as a going concern.

Nov 5, 2006 - Company made announcement on the placement of shares at 2.5cts to secure $3.57mio cash injection. Share price then was 4cts.

Early Feb 2007 - Ban Joo announced an intention to buy into various private property-related companies via the issue of 109 million new shares. [Who were the intended sellers? Were these deals an issue to SGX giving the approval?]

Mar 27, 2007 - It announced that these purchases were off because certain commercial issues could not be resolved.

Jun 21, 2007 - Sivanithy's article in BT. Should the placement go through on Jun 25, 2007, will the difference of $30-odd million be considered an expense to shareholders and therefore the company? If it were to account for it, will the company sink?

Jun 22, 2007 - The counter closed at 24cts with about 30 mio shares transacted.

My view
Going concern is an issue with the company since last year.

Company promptly went and look for white knights for quick cash to keep company going. Company also tried to look for some new businesses to be injected into the company. These deals went belly up in Mar 2007.

The company is in a precarious position.

• Be damn if it gets the $3.57mio and;


• be damn if the shareholders reject the proposal on Monday.

If it gets the $3.57mio, how long will $3.57mio last with the possibility of $30mio "expense" to be charged to its P&L with no new business deals?

If it didnt get the $3.57mio, how to solve going concern issue with no money and no new business?

Thus I wish to know how one justify the last traded share price of 24cts.

Is it irrational exuberance that has got into all our heads?

Buyers beware!!!

Ban Joo - Placement of shares at a discount

my gifts

On June 21, 2007, R. Sivanithy of BT wrote this article entitled "Ban Joo placement: why the SGX delay?".

This is how the story started.

Nov 5, 2006 - Ban Joo & Co proposed the placement of 145 million new shares @2.5 cents to two private investors. The net amount to be raised is $3.57 million, which the firm will use for acquisitions and investment in new businesses.

Two regulatory procedures to clear for the fund raising exercise to go through.

1. As the placement price is more than 10% discount to the prevailing market price of 4 cents at that time, SGX's approval is thus needed.


2. A special meeting for shareholders to give approval to it.

So what went wrong?

1. In his article, Sivanithy wished to know the reason for the delay between application date of Nov 5, 2006 and approval date of May 18, 2007.


2. The share price has risen to 24cts as of Jun 22, 2007. The intended buyers at the proposed price of 2.5 cts, would stand to make 21.5cts per share. A whalloping $30mio profit!!!! So existing shareholders are obviously not happy with the deal.


3. There is no "lock-up" clause in the proposal ie. the new shareholders would be free to sell the whole 145mio shares if they so wish.

FYI - The Extra General Meeting (EGM) will convene on Monday Jun 25, 2007, for the shareholders to decide on the proposal.

SGX responded promptly on Jun 22, 2007 as follows:-

• SGX received the application for listing and quotation of the placement shares on Mar 19, 2007 and NOT Nov 5, 2007 as alleged by Sivanithy.


• The proposal could not be accepted earlier as the company did not have any independent directors on its board. SGX had to remind the company of its continuing listing obligations. After which, the company appointed two new independent directors. [What type of company is this when it can't handle listing requirements?]


• The company confirmed that the issue price remained at $0.025 for each new share despite being reminded by SGX of the BIG discount.


• The proposal was approved on May 18, 2007.

SGX is thus in the clear on this.

What is "placement of shares"? The company is selling new shares at a price agreed to some buyers payable in cash or with assets. It is different from a rights issue where the new shares are issued to ALL shareholders at a certain ratio eg. 1:5 ie. 1 new share for every 5 shares you are holding.

Mr Richard Li of PCRD is at it again

What is the deal now?
On Mar 3, 2007, Pacific Century Regional Developments was reported to have sold its 47.06% stake in PCI, its Hong Kong-listed insurance arm for HK$3.14 billion to Fortis Insurance International.

What is Edgar not sure of?
Back in Nov 2006, PCRD's shareholders were asked to approve the sale of 22.64% stake in PCCW for HK$9.2 billion. That deal was rejected by the minority shareholders.

He is said to be selling off his "unloved" assets in PCRD. So far, we note that he doesn't like telecom and insurance businesses.
What other "unloved" assets will he sell?
What is his "loved" assets anyway?
What is the true value of PCRD?
Can someone do the sums please?

Or is he the Richard Gere's movie character in Pretty Woman, where he buys company and strips it apart and sells them in pieces for a profit?

The biggest winner of the deal is Mr Li himself, of course. But he would have to share the fruits with the minority shareholders of PCRD, right?

Congratulations to Mr Li.

P/S - I still got no position in PCRD.

Mr Oei has struck another deal again!

P/S - Appreciate what we have.

The main players
- Mr Oei Hong Leong in International Capital Investment Ltd (ICIL), (formerly Jurong Engineering Ltd)
- TT International, which makes and sells the Akira range of electronic appliances

For a complete picture of the sequence of events of Mr Oei to date, see my previous posting.

What is the deal?
TT announced on Mar 1, 2007 that it was injecting its Akira assets, business and undertakings which it valued at $90 million into ICIL.

Upon completion of deal, TT would own 77% of ICIL while Mr Oei's stake would be reduced from 76% to 17%.

Issues to be considered:-
- The two shareholders would jointly owned 94% of ICIL. As free float of 10% of company's shares is required, divestment of shares is necessary to maintain listing status.

- How to justify valuation of Akira's business at $90mio? Ms Julia Tong, exec director of TT, cited Interbrand, a branding consultant, who had attributed a value of $49 million to the Akira brand back in 2005. TT is said to have grown and now sells in more than 60 countries. Of course, Mr Oei must have checked and considered the valuation as fair for him to give away 77% of a cash-rich company in ICIL.

What does the deal mean to each player?
TT - By focusing a brand and its business into a single vehicle, it is giving prominence to it. Hopefully translating to more business at next level. Back door listing format. TT will probably get some cash from divesting a few percent of ICIL shares.

ICIL - May have found a business to continue its listing status. As no cash payout is mentioned in this deal, the cash hoarding will provide plenty of ammunation to fund Akira's growth.

Mr Oei - He has bought himself into a growing business that is scalable very quickly and can be part of his China's experience.

What is happening with Mr Oei, Novena and TT International?

The main players
- Mr Oei Hong Leong thru' its Foundation
- Novena Holdings - in the furniture business
- TT International - famous for its Akira branded electronics

Sequence of Events
11 Dec 2006 - Novena bought 98 Pasir Panjang for $13.5mio.
11 Jan 2007 - Novena bought 100 Pasir Panjang for $14mio.

22 Jan 2007 - Mr Oei bought the 2 properties from Novena. Novena got $2.3mio pure cash and profit.

21 Jan 2007
- Mr Oei sold its 20mio shares in Tung Lok to Novena. Novena paid Mr Oei with 10.3mio new Novena shares.
- Mr Oei will further buy 27mio new Novena shares @30cts ie. $8.1mio cash.
- Based on my calculation, Mr Oei would be a substantial shareholder with about 25% stake in Novena.

21 Feb 2007
- About a month later, Novena announced the sale of some of its furniture business to TT International for $13.5mio cash.
- In the same breath, Novena will buy about 18.3mio of TT International shares @20cts. Novena would effectively return about $3.6mio of the $13.5mio back to TT.
- At the end of it, Novena would own about 14% of TT Intl.

What does the whole series of activities mean to each player?
- Mr Oei have purchased 2 properties (not sure whether they are adjacent to each other) for $29.8mio. He also got rid of Tung Lok shares for a stake in Novena and TT International.

- Novena made $2.3mio from the property deals. Novena got about $10mio cash from selling part of its furniture business. Total cash inflow - about $13mio.

- TT International paid about $10mio for Novena's retail assets. Could we see TT transforming itself into a Court or Harvey Norman by marrying furniture with Akira range?

Well all the players have been and will be very busy to make the deals work for ALL shareholders to come.

Is something cooking in HG Metal?

On Aug 15, 2006,
HG Metal secured refinancing by entering into a $10,000,000 convertible loan arrangement with OCBC Bank @36.1cts. FYI the share price was 45cts on that day.

On 13 Dec 2006,
HG Metal's share price dropped to as low as 24cts.

On Jan 5, 2007,
OCBC converted $3,176,800 for 8,800,000 shares.

On Jan 8, 2007,
SGX gave its in principle approval for 2-for-5 rights issue at 20cts per share.

There is also a special dividend of 4cts per share to partially assist to pay for the rights issue.

On Jan 19, 2007,
Its share price closed the week at 51cts. The shares are trading on a cum-all basis till Feb 5, 2007.

I am curious with the following questions.

1. Why would OCBC be interested in HG Metal with 4.76% stake?
2. On what basis did HG Metal convince OCBC to accept the convertible deal?
3. While banks are encourage to diversify their non-core assets, are banks allow to take these relatively "tiny" equity positions?
4. In 4 months, OCBC's $10mio convertible loan is in the money with a return of 41%. Will OCBC be holding on to the shares from conversion? Any more conversion to be expected from OCBC before Feb 5, 2007?

Does anybody out there got any answer to the above?

Tang Plaza is actually in different parts now!!!

Hi guys,

This is a follow up to my earlier story on CK Tang's 2nd offer to take the company private.

In BT dated Jan 8, 2007, Mr Wong Wei Kong has recommended that the minority shareholders should just take the monies and run. His basis was the gloom n doom about retail business, the track record of its management in the business, blah, blah, blah,...

But are we missing the point?
The sum of whole is worth more than in parts.

The freehold hotel/retail complex - known as Tang Plaza - is a strata titled property. CK Tang owns only its department store space, giving it only about 28 per cent of the total share value in Tang Plaza. The rest of the complex is a Tang family holding, as is Marriott Hotel.

Can you imagine the Tang brothers putting 28% of Tang heirloom at risk? Of course not. Thus the Tang brothers are trying to re-secure their control of that 28% with the 2nd offer.

The sum of whole is worth more than in parts. Think about it!!

Isetan Singapore

Minority investors are working very hard now trying to get Isetan Singapore to pay $2 special dividend to take advantage of S44 tax credits.

It is reported that Isetan Tokyo would have to pay a higher tax in Japan on dividend received from Singapore. Thus Isetan Singapore, 61% subsidiary of Isetan Tokyo, has been very very nimble in paying less than 2% dividends over the year.

Discussion with Isetan management has not resolved conundrum.

It was noted that capital appreciation for this counter over 25 years is estimated at only 57%. Hmm .. has Isetan Singapore been listed in Singapore for so long? "1981", said Mr How Kok Kooi, now 70 years old.

By listing in Singapore, Isetan Tokyo must have obviously done so after considering its tax advisers. It is costly to receive foreign dividends.

Then how does Isetan Tokyo justify its involvement in Singapore?
Isetan Singapore pays royalty fees to Isetan Tokyo ie. a percentage of turnover (regardless of whether Isetan Singapore makes money or not).

The 61% shareholder gets paid a percentage of turnover every year (wonder how many percent), while the remaining 39% shareholders have been getting less than 2% (on par value or share price?) over the 25 years?

Is it really like that?

Next question - Now that Isetan Singapore has some accumulated profits over the year, what is the modus operandi of Japanese companies with foreign subsidiaries in dealing with cash cows given the tax structure in Japan?

P/S - I don't own any Isetan shares.
Share price as of 29 Dec 2006 - $5.20 at PE of 22.1

C K Tang - Deja vu?

Proposal
Tang brothers are offering shareholders 65cts per share.
If acceptances > 90%, they will pay 70cts.

Background
This is the 2nd effort to privatise the company.
First time in Oct 2003 at the then offer price of 42cts was voted down.
There was an episode with UOB Bank on the financing extended to CK Tang. Based on my memory, CK Tang has secured re-financing from an alternative source after paying an early settlement fees to the tune of million of dollars.

Question
Is the current price a fair offer for a stake in a very very very prime real estate albeit in a competitive retail business and rapidly improving hotel business?

If the shareholders had accepted the offer in 2003, a shareholder would have missed on about 15% per annum rate of capital appreciation.

Minority shareholders, please do not be distracted by the poor health of Mr Tang Wee Sung. As a human, I am sorry to hear that.

But please justify the economic basis for the offer.

P/S - I have no C K Tang shares as of today.