KUALA LUMPUR (May 24): Controlling shareholders of Wing Tai Malaysia Bhd (WTM) want to take the property developer and apparel retailer private at RM1.80 per share.

The offer price is a 52% premium over its last traded price of RM1.18 on Monday before the stock was suspended from trading yesterday. However, it is 34% below its net tangible assets of RM2.73 per share as at March 31.

In a filing with Bursa Malaysia yesterday, the company said it has received a voluntary takeover offer from Wing Tai Holdings Ltd (WTH) and Wing Tai Investment & Development Pte Ltd (WTID) for a cash offer.

The announcement said the controlling shareholders have no intention to maintain the listing status of the company, which is involved in property development and fashion retailing.

“WTM is massively undervalued at the takeover price of RM1.80,” said Pangolin Investment Management director James Hay. The asset management firm currently holds a 2% stake in WTM at an investment cost above RM2.

“Don’t forget there was a rights issue [in 2015 at RM1.15 per share],” said Hay, who pegs the fair value of WTM at RM3.63 per share.

His fair value is derived from sum-of-parts valuation, pricing the company’s retail unit (excluding its joint venture [JV] that operates Uniqlo stores) at RM132.8 million, or 28 sen per share, plus the 45% stake in the Uniqlo chain at RM211 million or 44 sen per share.

Also, Hay reckons that WTM’s high-end residential project Le Nouvel here could generate profit of RM100 million, or 21 sen per share.

Besides unsold properties and land bank, WTM manages a portfolio of 12 international fashion brands such as Topshop, Topman, Dorothy Perkins, Miss Selfridge, Warehouse, Burton and Furla. The company also owns a 45% stake in the JV with Japan’s Fast Retailing Co Ltd that operates 36 Uniqlo outlets in Malaysia.

For the third financial quarter ended March 31, 2017 (3QFY17), WTM achieved a higher net profit of RM26.04 million against RM21.39 million a year ago. Earnings per share grew to 5.48 sen in 3QFY17, from 4.87 sen in 3QFY16.

The company’s retail business was the main earnings contributor.

Hay estimated that about 85% of WTM’s profit came from fashion retailing. He forecasts the retail division to generate a net profit of RM34.4 million, or 7.2 sen per share.

WTH and WTID directly hold 222.37 million and 91.94 million WTM shares respectively, representing a total of 66.13% of the voting shares in WTM.

WTM’s share price has been on a downhill since mid-2013. The stock has drifted down from the peak of RM2.225 in May 2013 to 94 sen in December last year — the lowest level it hit since July 2010.

The downward trend in the share price is a reflection of waning interest in the stock as its earnings performance has not fared well in the past three financial years.

For FY16, WTM’s net profit shrank to RM10 million, or 2.24 sen per share, compared with RM69.6 million or 21.63 sen per share in FY15.

This article first appeared in The Edge Financial Daily, on May 24, 2017.

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