LTC Corp (prev. Lion Teck Chiang)

[weijian]

A very relevant question : Why would the Cheng Family want to take a bold move now to privatise LTC at a big premium, bearing in mind it is a complicated deal as many parties are involved in the consortium, and there is no certainty that they would succeed even for the money they have to spend on professional fees and financing ?

IMHO, the Cheng Family must have up their sleeves some plans to extract additional value from LTC's businesses or assets. The most valuable asset in LTC has to be the large piece of freehold industrial land just next to MacPherson MRT Station on Downtown and Circles Lines. For such a prime-prime location, why shouldn't URA allow the site to be redeveloped into a large mixed integrated development like those few projects around Paya Lebar MRT Station on East West and Circle Lines?

Maybe I can answer that.

The BV is $1.64, and they're privatizing offer is $0.925, so there's a big fat MOS baked in.
Their hard assets particularly the Lion buildings, alone would account for that.

On top of that, their steel trading business is currently on the upswing, or at least at the nascent part of a recovery.
China restricted steel exports, and steel prices have been rising rather rapidly.
I wrote in my thesis previously, how rising steel prices accrue exponentially, due to the method of revenue recognition (Weighted ave inventory cost)

I think the Chengs are getting a good deal, and they'd likely succeed, unless someone comes in to make a counter offer.

I read through the history of this thread again, and tried to reconcile with what has eventually happened.

- The "big hoo-ha" on airbase relocation/rezoning had to die down first before serious ("deep-value") OPMI investors could make good money on a value trap.
- Similarly, rich owners don't move based on news, they are patient enough to wait for the OPMI to become depressed enough on aggregate, before throwing a lifeline. By that time, the aggregate OPMI is already depressed enough to see the lifeline as the justification for their "patience/deep value investing" --> so yes, it is WIN-WIN!
- To make good money, there has to be good MOS as well. With respect to P/B, how much MOS is really enough (wrt to the opportunity costs) while waiting for the value trap to unraveled itself?
- The history of IPTs (in the context of the Lion Group) is actually a very clear red flag and out of most scenarios, investors would have avoided a loss by adhering to such flags.
- The Chengs will probably succeed in delisting - i can predict that the IFA report will say something like "offer is fair and reasonable but not compelling. If investors believe they can get a better price in future, they can don't sell. If they believe they cannot get a better price, they should sell it".