Sime Darby rises on acquisition of Saizen REIT
In addition, Japan Residential Assets manager will sell 80 per cent interest in the manager to SDPSL and there is a call option for the remaining 20 per cent equity interest any time after 24 months from the completion period. PublicInvest Research
KUCHING: Shares of Sime Darby Bhd (Sime) rose yesterday following a framework agreement with Japan Residential Assets manager, manager of Saizen Real Estate Investment Trust (Saizen REIT), to acquire a majority stake in Saizen REIT.
This will be done via a reverse takeover (RTO) by injecting Sime’s Australian industrial property into the trust in exchange for more than 30 per cent stake in the enlarged issued capital of Saizen REIT.
Yesterday, the stock rose 17 sen to RM8.26 per share at closing with 13.83 million shares traded.
It is estimated that Saizen REIT’s market capitalisation will be at least about RM900 million following the completion of the asset injection exercises.
The team at Public Investment Bank Bhd (PublicInvest Research) noted that under the arrangement, Sime’s subsidiary, HastingsD eering (Australia) Ltd (HDAL) will sell certain of its industrial properties in Australia to Saizen REIT, which would be eventually master leased to HDAL while another Sime’s subsidiary, Sime Darby Property Singapore Ltd (SDPSL) will be issued new units at S$0.03484 per unit (RM0.10) in Saizen REIT as part of the reverse takeover of Saizen REIT by Sime.
“In addition, Japan Residential Assets manager will sell 80 per cent interest in the manager to SDPSL and there is a call option for the remaining 20 per cent equity interest any time after 24 months from the completion period,” it detailled in the note.
“As the issuance of new Saizen REIT units will lead to more than 30 per cent stake owned by SDPSL, which will trigger the mandatory general offer for all the remaining issued units not owned, SDPSL intends to make an application to the Singapore’s Securities Council for a waiver.”
To note, Saizen REIT is a Singapore-based REIT established since 2007 with the objective of investing into Japanese residential real estate assets. The company has a market capitalisation of S$34.7 million or RM104 million as of August 15.
The firm used to manage 136 properties with a total value of RM1.5 billion over 14 Japanese cities. Following the completion of the disposal of Saizen REIT’s entire portfolio of real assets to Triangle TMK on March 4 this year, Saizen REIT ceased to have any operating business and currently exists as a cash trust.
Most of the proceeds from the disposal were paid out to unit holders via a special distribution. Its current cash level stands at S$0.0987 per unit.
“It is believed that the properties to be injected are the assets drawn from Sime’s industrial arm, which markets and distributes Caterpillar equipment across Australia,” PublicInvest Research added.
“There is a total of 18 industrial properties located across Australia with a total book value of more than RM1 billion. We believe it could fetch additional valuations of RM0.20 to RM0.35 to our target price. price.”
MIDF Amanah Invesment Bank Bhd ( MIDF Re sea rcch)h) was similarly positive on the news as the monetisation of Sime Darby’s asset in Australia should help to lower the group’s net gearing. “We maintain neutral on Sine Darby with a target price of RM7.85 per share. We maintain our FY16 and FY17 core net income eatimates at RM1.54 billion and RM1.88 billion respectively pending further details on the corporate exercise.” RHB Research Institute Sdn Bhd predicted the move as it had highlighted this upcoming disposal in previous reports where Sime Darby indicated that its industrial asset disposal in Australia would garner about RM1 billion.
“We hold on to our forecasts until the definitive agreements have been signed and the disposal value and gain is made clear. Thus, we make no change to our NEUTRAL recommendation and our target price of RM7.60.”
Similarly, TA Securities Holdings Bhd said it was unable to ascertain the financial impact of this proposal as not much details were disclosed and the discussion is still at a preliminary stage.
“We are leaving our earnings forecast unchanged at this juncture pending signing of sale and purchase agreement.”