Privatisation of Al-Hadharah REIT fair: HLIB

KUALA LUMPUR: Al-Hadharah Boustead Real Estate Investment Trust’s (Boustead REIT) independent adviser Hong Leong Investment Bank (HLIB) is of the opinion that the privatisation of the REIT by its major shareholder, Boustead Holdings Bhd, is “fair” and “reasonable”.

Boustead Holdings had in July proposed to privatise the group’s oil palm plantation-based Boustead REIT through a selective unit redemption and repayment (SUR) exercise.

In its filing with Bursa Malaysia yesterday, HLIB said the proposals are “fair” as the deemed consideration price of RM2.10 per unit is above Boustead REIT’s fair value of RM1.85 and is at a premium to the historical unit price and closing unit price as at Nov 14, the latest practicable date (LPD).

HLIB is also of the view that the proposals are “reasonable” based on the evaluations set out in the independent advice circular and also taking into consideration that there have been no alternative offers received to date.

“Accordingly, we recommend that you vote in favour of the resolution pertaining to the proposed SUR to be tabled at the forthcoming unitholders meeting,” said the investment bank.

In evaluating the fairness of the proposals, HLIB has taken into consideration the valuations of Boustead REIT’s assets as well as the historical unit prices and performance of the units.

The investment bank is of the view that the deemed consideration price of RM2.10 per unit is fair as it is above the fair value of the units based on the realisable net asset value (RNAV) of RM1.85 and the last traded price as at the LPD of RM2.06.

In assessing how reasonable the proposals are, HLIB took into account the proposals’ rationale, which is to provide an opportunity for entitled unitholders, especially those holding large blocks of units, to realise their investments for cash in an efficient and expeditious manner at a premium.

HLIB has also looked into Boustead REIT’s trading liquidity and its financial performance.

The investment bank said for the past one year prior to the announcement, trading of the units showed poor liquidity compared to the simple average of all other REITS listed locally.

“This implies an inactive market for trading of the units. As such, entitled unitholders may have limited opportunities in realising their investment in the open market,” it said.

The proposed privatisation came amid the group’s plan to consolidate its plantations assets under Boustead Plantations Bhd (BPD), which will be listed on the local bourse.

Under the SUR, holders of Boustead REIT units will receive a cash repayment of RM2.10 per unit, comprising RM1.90 per unit and a special gross dividend of 20 sen per unit.

Upon completion of the proposed SUR, Boustead REIT will be converted from a collective investment scheme into a private property trust.

This article first appeared in The Edge Financial Daily, on November 21, 2013.