article in australia about capitaland

See article below about CapitaLand and possible takeover of Australand. This is supportive for ALZ equity but the market is perhaps missing the opportunity in AAZPB.



Assume you buy at 40 and conversion to equity takes place in Oct 2010. If you sell the converted equity at 10% below VWAP, equivalent rate of return is 103% per annum. If they redeem for cash, rate of return is a bit higher. There is of course a risk that CapitaLand privatise and keep notes in market (just like Multiplex) but at a rate of 5.5% over bank bills, I think CapitaLand will eventually redeem (say October 2010);









Asian leader CapitaLand has eyes for local Australand
Florence Chong | April 02, 2009

Article from: The Australian

LEADING Asian property group CapitaLand is believed to be investigating privatising Australian-listed property group Australand ahead of a debt repayment due in June, sources in Singapore say.

CapitaLand, which already owns 59.3 per cent of the Australian developer, has a war chest of $S6 billion ($5.7 billion) following last week's $S1.84 billion capital raising.

Sources in Singapore told The Australian that an opportunity to privatise Australand could arise when its $562 million of commercial mortgage-backed securities (CMBS) matured in June.

CapitaLand, with assets of almost $S26 billion, made a net profit of $S1.26 billion in the 2008 financial year.

"It is a possibility. CapitaLand has more than enough money in its kitty to buy out Australian shareholders," said one source.

Another analyst said: "The question was raised when CapitaLand management met analysts recently and the response was 'we'll consider all options'."

The head of equities research with a large broking firm said that when the CMBS matured, CapitaLand had the option of issuing a shareholder's loan using convertible notes which could be converted into equity later.

"The CMBS market is closed to new issues and Australand would have to seek a bank loan to replace the debt," said the researcher.

Several analysts, who asked to remain anonymous, told The Australian that most people recognised that Australand was trading at a big discount to book value.

They said the drop in its share price in the past six months had raised the issue of the Australian group's viability as a listed entity.

"Its shares are thinly traded," said an equity analyst with a Singapore firm. "The only reason for having a listed vehicle is access to capital, but this is not happening now. Instead, it depends on its parent for capital."

Other industry sources said CapitaLand "could do more deals" as a private company without having to seek shareholder approval or scrutiny.

Based on the yesterday's closing price of 26.5c, said the head of research, it would cost around $200 million to buy the remaining 40.7 per cent of the company.

"It could sweeten the deal to minority shareholders by offering a premium of 20-40 per cent to the unit price, which would cost $260-$300 million."

This would give CapitaLand a company with net tangible assets of 89c per unit for less than 40c a unit