Although the offer price of 45 sen is nearly 10% premium over the last traded price of 41 sen before the takeover offer announcement, it is still a steal when compared with AP Land's net assets per share of RM1.03 as at Sept 30, 2010. The counter closed 1.5 sen higher at 42.5 sen on Wednesday, the highest since Feb 11, 2008, with a total of 4.3 million shares changing hands.
Given such a low premium offered to other shareholders, will Low Chuan Holdings, the investment vehicle of the Low Yat group, succeed in the acquisition?
Without the existence of other substantial shareholders holding over a 5% equity stake, the offer to buy AP Land seems likely to be smooth sailing for the Low Yat group.
But other shareholders could be deprived of a higher premium as AP Land has a relatively asset-rich balance sheet, with land in Malaysia, China and Japan.
Balance sheet-wise, the group is relatively healthy, with net debt amounting to RM49.6 million as at Sept 30, 2010, or a 7.1% net gearing ratio. Its gross cash position was RM165.55 million against debt of RM215.16 million as at Sept 30, 2010.
Some of the major property projects under its stable include the flagship project at Bandar Tasek Puteri in Rawang, a commercial development project in China's Changshu City, and a residential development comprising luxury boutique apartments in the Niseko region of Hokkaido, Japan.
It is worth noting that the bulk of assets in Bandar Tasek Puteri have not been revalued since 1995. And now AP Land is constructing an interchange to link its flagship project at Bandar Tasik Puteri to the KLKS Expressway to improve its accessibility.
With this development, the value of the land is expected to grow.
AP Land is also positioning the township as a major education and retirement village centre, following a tie-up last year with HELP International Corp Bhd. Although the land is leasehold and will expire in 2060 and Rawang is not necessary a hot property spot, the scale of the land is large while its cost is very low.
According to its 2009 annual report, there are two large parcels that comprise much of the land in Bandar Tasek Puteri. One parcel, listed as "properties under development" measures 814,957 sq m, or 201.38 acres, and has a book value of RM84.2 million.
This works out to be RM9.60 per sq ft.
The other parcel held for development measures 4.22 million sq m, or a massive 1,042.67 acres. It has a book value RM174.2 million, which works out to just RM3.84 per sq ft.
While the landbank already appears undervalued at its book cost, an analyst noted the offer price of 45 sen was at a 56.3% discount to its book value.
He said it was due to an inefficient market, as AP Land's shares had been trading at a steep discount to its underlying asset throughout the years, possibly due to its low profile and unexciting earnings. The stock is not on the radar screens of analysts and there is hardly any institutional interest in the company.
To recap, Low Chuan Holdings, which holds a 33.98% stake in AP Land, proposed to buy the company's entire assets and liabilties for RM305.2 million or 45 sen per share.
The owners of Low Chuan Holdings are Low Gee Tat @ Gene Low, who is also AP Land's executive chairman, joint managing directors Low Gee Teong, Low Gee Soon, Sem Siong Industries Sdn Bhd and Low Chuan Securities Sdn Bhd.
Low Chuan Holdings will pay for the offer by way of RM201.52 million in cash and RM103.70 million as amount remaining due and owing to AP Land.
Upon completion of the asset sale, AP Land will undertake a capital repayment to return 45 sen per share to shareholders. The Lows, in turn, would receive RM103.7 million from the capital repayment which is exactly the setoff amount remaining due and owing to AP Land.
Aside from the Lows, there are no other notable major shareholders.
For instance, as at April 30, 2010, the top 30 shareholders control only 58.25% of the company's shares.
Apart from Low Yat group companies, most shareholders are individuals with less than a 2% stake in AP Land each. There exists only one institutional shareholder in the top 30 list, which is Dimensional Emerging Markets Value Fund, with a 0.83% stake.
The Lows' offer will lapse after 5pm on Jan 28. It remains to be seen if other shareholders would demand a higher price for the bid.
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