Referring to LBS BINA GROUP
BERHAD (5789) latest announcement, hereby I share my humble homework and insight regarding the disposals matter.
Amount of Sales/Disposals
First, total sale
consideration is HKD 1,650 million, or around RM657.69million with exchange
rate of 1 HKD: 0.3986 RM. Thus, the total sales value of
the two assets (that are, Land Plots and Lakewood) is around RM1088million.
Since the wholly-owned
subsidiary of LBS (LBS <-100% Intellplace holdings limited <-100% Dragon
Hill corporation limited) Dragon Hill’s wholly-owned subsidiary (i.e. Lamdeal Development and
Lamdeal Golf )
has 60% of the aforementioned disposal, the estimated revenue for LBS is around
RM653million (i.e. RM1088million times 60%).
Relationships between related companies
Dragon Hill wholly owns both Lamdeal Development andLamdeal Golf.
Lamdeal Development 60%-owns Zhuhai
Consolidated Development that owns Land Plots,
which scattered within the 36-hole Lakewood golf club ("Lakewood Golf
Club").
Lamdeal Golf 60%-owns Zhuhai Golf that owns Lakewood Golf Club.
After figure out the relationship
between the assets and LBS Bina Group, now, we need to re-evaluate the
reliability of the disposal (or the success rate).
Valuation methods
Land Plots - Direct comparison approach and residual approach as a cross-check
Lakewood Golf Club - Income approach – Discounted cash flow analysisMarket value of these assets is: RM1088million.
Hmmm… it
looks like quite difficult for me to comment properties/land valuation since it is out of my
knowledge in this moment.
Next, the two
important things that every potential or present shareholders concern about are:
(1) mode of settlement (how the payment made), and (2) how the management will
use the revenue
Mode of settlement
Zhuhai
holdings (the buyer) is going to issue share to LBS (5789) with amount around
119million, and cash of RM199million and deferred cash payment of RM338million.
The deferred
cash payment will be completed by Dec 2017 (i.e. approximately 25% paid by 2014,
2015, 2016 and 2017, respectively).
The use of
the cash of RM199million is just for Gerenal working capital and reduction of
borrowings and those expenses of the disposal. In short, I do not expect any
surprise in terms of dividend.
The deferred
cash payment, on the other hand, (around 84million annually) is planned to be
used to maximizing shareholders’ value. How? I have no idea, of course. Some
people believe re-invest can maximizing shareholders’ value, some people believe
special dividend can also. So, what do you think about this matter?
Rationality
Rationale or
not? Look like rationale according the statement provided:
- Unlock the value of investment
- Switch from its investment from unlisted to listed company to have better liquidity (the payment in terms of shares of Zhuhai holdings).
- Synergy between LBS (5789) and Zhuhai holdings in PRC market.
EFFECTS OF THE PROPOSED DISPOSAL
- NTA will be increased to RM1.74 from RM1.17.
- Gearing (times) will be decreased from 0.81 to 0.55.
- EPS will be increased by 63.06sen.
ESTIMATED TIMEFRAME FOR COMPLETION
The Proposed Disposal is expected to be completed by the
third quarter of 2013. Or, around six months from now.
Insights and Comments
So, is it a
good deal in the short term (6-9months)? I have no idea, again. If it is a 100% good
deal, then I will invest all my assets on it. But I do not and will not do such
thing. I do invest a very tiny portion on it as a way to build my confidence.
Any risk? Of course. Risks are those unforeseen circumstances, such as, the buyers suddenly bankrup or terminate the agreement, the valuation is too high and majority shareholders disagree with the proposals of disposals during EGM (I think it is less likely).
Any risk? Of course. Risks are those unforeseen circumstances, such as, the buyers suddenly bankrup or terminate the agreement, the valuation is too high and majority shareholders disagree with the proposals of disposals during EGM (I think it is less likely).
For more
details information about the multiple proposals, please refer to the announcement:
That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.
Written by: Xaivier Chia
P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.
|
|
: I hope you will find some useful information from this sharing. If so, feel free to share it with your friends now.
No comments:
Post a Comment