$$$ KPO and CZM $$$: CapitaLand at a Discount - CLIM, CICT and Cash

Wednesday, March 24, 2021

CapitaLand at a Discount - CLIM, CICT and Cash

By now, you should have seen multiple news on the restructuring proposed by CapitaLand. In my opinion, I do think it is a win-win deal. They get to privatized a part of their business at a "cheap" rate (considering the offer is below NAV) while shareholders get to unlock some value and continue to own other parts of their businesses. For those that are not aware, you can take a look at their announcement here

For every CapitaLand share, one will get 1 CLIM share at $2.823 NAV, Cash of $0.951, and 0.155 CICT share. It was stated that "The Cash Consideration will not be reduced by the amount of the FY2020 Final Dividend after the dividend payment is made." Hence, we can also include the 9 cents dividend for FY2020.

They halted for the whole day yesterday and I was surprised when I saw the price of CapitaLand to be trading at a discount compared to what was offered. Using the closing price for the day, it was trading at a 11.72% discount which is quite significant. I was expecting it to be closer to $4 because the CLIM share and cash should be a constant/fix value and the only variable is the share price of CICT.

There are probably a couple of reasons for the discount. The restructuring might not go through and given that CapitaLand has never traded at such a high price, if the deal is called off, the price will surely drop back to low/mid 3+. The market is discounting the value of the CLIM share after all CapitaLand has never traded at NAV so why should CLIM share be valued at NAV too right? Alternatively, there might be shareholders who find the restructuring too complex and are selling it off now without having to deal with the CICT odd lots.

In my opinion, the restructuring will highly likely go through, the decrease in CICT share price is too insignificant to warrant such a discount and likely the market is discounting the CLIM share (too much). Anyway, I believe it should not be trading at a discount because it is no longer considered as a property/developer stock.

Let's take a look at the other 2 listed REIMs.

Brookfield Asset Management is trading at 2.46 PB.

Blackstone Group is trading at 8.34 PB! 

In comparison, CapitaLand is trading at just 0.756 PB. Not sure if anyone remembers ARA Asset Management that got delisted back in 2017? That is a REIM and they were not trading at a discount back then.

If you do not want to have any CICT odd lots, these are the magical CapitaLand shares you will need to own.

Alternatively, you can also own the above number of CapitaLand shares to reduce the number of odd lots. I have created a spreadsheet here and you can play with it to see the discount as well as the number of CICT odd lots you might be getting.

Anyway, we bought another 5,000 units at $3.75 earlier today because we believed it is still trading at a discount and also to reduce the number of odd lot we will be getting for CICT. In total, we now own 17,434 shares of CapitaLand. Huat ah!

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  1. nice sheet.

    what is the deadline to accum the capland share before split, and the odd lots kick in?

    i am also using SCB PB. do you know whats the cost for trading odd lots?

    1. Hi foolish chameleon,

      No date at the moment but it should be around the later half of the year, so there's a long way to go!
      EGM and Scheme Meeting: In or around 3Q 2021
      Completion – listing of CLIM and delisting of CapitaLand: In or around 4Q 2021

      Odd lots can only be transacted by the broker which cost $25 if I remember correctly. Asked many years ago and decided it is best to leave it rather than trade the odd lots.

    2. dont have chunky warchest like yours to get 20k shares!
      think i will just aim for the 0.5 oddlots and leave it as donation!

    3. Haha. Don't so humble la, you also SCB PB customer. Anyway, my warchest is borrow from SCB one.

  2. with the current capland price, the market is probably valuing the future CLIM ~0.89x PB

    1. Looks like it and I think the market is discounting it too much!

  3. If I read it correctly, the number of CICT that Capland will give to shareholders has a range so your projection will not be very accurate.

    1. Hi Henry,

      The range is there "on a pro-rata basis". Not sure how they going to determine it but under normal circumstances, we should be getting the 0.155 CICT shares. As mention, CICT shares made up just a small part (8%) of the offer and is unlikely to be the reason for the current discount in CapitaLand share price.

    2. This is a long term dividend stock for me. I used to trade it decades ago but since 2015 I bought it for dividend. Last year I bought even more, I see it becoming giant one day.
      For odd lots, can lump all into 1 contract, meaning pay commission once only after he he do OTC for me, as long as its on the same day. Anyway not interested to sell.

    3. Haha. Nice, CapitaLand is already one of the giants in SGX. lol. Anyway, congrats on holding CapitaLand. Decent profits for you! We are also not selling. Might even buy more if it dips lower.

    4. @henry,
      can we amalgate (lump) all into one trade? even for odd lots? i didnt know that. i always thougt odd lots need to go thru broker (offline trade). hence higher fees

  4. lol great minds think alike. i also entered at 2.76 on friday about 23k shares after figuring out this doesn't make sense for the discount of almost 11%.
    the only thing i forgot is the odd lots of CICT - i guess i need to go top up more.
    all the best :)

    1. Hi FutureValue,

      Haha. Ya man. It doesn't make sense to us too. If it drops further till 15-20% discount, we will buy more! All the best to you too!