Home > capmallsasia > CapMallsAsia in Malaysia. Good or bad deal?

CapMallsAsia in Malaysia. Good or bad deal?

From The Edge
CapitaMalls Asia sas it has received approval from the Securities Commission of Malaysia to list CapitaMalls Malaysia Trust (CMMT), which will hold CapitaMalls Asia’s Malaysia shopping malls, on the Main Market of Bursa Malaysia Securities Berhad.

CapitaMalls Asia has received approval from the SC to list 1.35 billion CMMT units on Bursa Securities. If the proposed listing proceeds, CMMT units will be offered to institutional and other investors in Malaysia and overseas, and to the general public in Malaysia only. It is not available to retail investors in Singapore.

A total of 786,522,000 units will be offered, with CapitaMalls Asia retaining a stake of 41.74% in CMMT. If an over-allotment option of up to 15.0% of the proposed offering of 786,522,000 units (amounting to 117,978,000 units) is exercised, CapitaMalls Asia will retain a stake of 33% in CMMT.

CapitaMalls Asia says the Employees Provident Fund Board of Malaysia and Great Eastern Life Assurance (Malaysia) Berhad have signed up as cornerstone investors for the proposed offering to subscribe for 90,000,000 units in aggregate, which is 11.4% of the total of 786,522,000 units being offered to investors. The cornerstone investors have agreed to pay RM1.10 ($0.47) per unit or the institutional price, whichever is lower. At RM1.10, the estimated distribution yields for the Forecast Period 2010 and Forecast Year 2011 are 6.5% and 6.8% respectively.

CMMT will invest in a portfolio of income-producing real estate primarily used for retail purposes and located primarily in Malaysia for the long-term. Its initial portfolio comprises three shopping malls which are strategically located in three sites across Malaysia. The three assets are Gurney Plaza in Penang, an interest in Sungei Wang Plaza in Kuala Lumpur, and The Mines in Selangor.

The portfolio has a total net lettable area of 1.88 million square feet. AmTrustee Berhad, the CMMT Trustee, has conducted a separate valuation, which valued the portfolio at RM2.13 billion.

CapitaMalls Asia believes that if listed, CMMT will be Malaysia’s largest listed “pure-play” shopping mall REIT by market capitalisation and property value. CMMT will be CapitaMalls Asia’s designated listed vehicle to hold its stabilised Malaysian retail assets as CapitaMalls Asia seeks to capitalise on acquisition opportunities present in Malaysia’s fragmented shopping mall market.

CMMT will be given a right of first refusal over retail properties located in Malaysia that CapitaMalls Asia or any of its subsidiaries may identify and target for acquisition in the future, including a right of first refusal over Gurney Plaza Extension.

CapitaMalls Asia says Malaysia is a key growth market for CapitaMalls Asia and the third largest contributor to the company’s earnings before interest and tax (EBIT) for the financial year ended 31 December 2009, contributing $52.4 million. The proposed listing of CMMT will enable CapitaMalls Asia to accelerate the growth of its shopping mall business in Malaysia, as CMMT will have direct access to both domestic and international capital markets.

The proposed listing will also provide other significant benefits to CapitaMalls Asia. It will unlock shareholder value by realising the value of CapitaMalls Asia’s shopping malls in Malaysia, and increase the overall financial capacity and flexibility of the company to extend its growth both in Malaysia as well as the other countries it operates in — Singapore, China, Japan and India. This is consistent with CapitaMalls Asia’s approach of optimising business growth with prudent capital management.

From here it seems like the Singaporeans investor is not getting the better deal out of it. So what benefit will the current investor benefit since it is going to be sold definitely at a discount to our counter party in M’sia? Will we get it in the form of special dividend. I think the management needs to better explain how does this work for us. How much of the current profit the current investor have to give up in order to see the increase in potential for the future. It’s a bit like Kraft buying Hershey with lots of goodwill isn’t it?

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