Isetan Singapore

[specuvestor]

From a die hard shareholder point of view, make the discussion more complete I guess

https://www.theedgesingapore.com/news/ma...es-company

Held since IPO. He should be glad he get to see the end of the tunnel before he himself see the light

Buy and hold forever. Not for me. I prefer Keynes “When facts change I change my mind”

I’m just a spectator to learn something from the episode.

Hi ghchua

The idea of franked dividends is so that company can only pay dividends out of profits that they paid tax, unlike currently like you mentioned you can pay dividend out of profit even without paying tax from tax accounting. So yes they made a lot of taxed profits in the past but chose not to pay out to OPMI but subsequently bits of dividends under the non S44 regime. Whether retaining make sense or not will depend on what is your interpretation of a holding company discount.

So if you held it from the S44 days till before the privatisation you probably double your money over ~25 years or 100% MTD depends how you wanna calculate it. I'm not sure about your interest in this but I do remember the frustrated OPMI at the AGM

In any case this privatisation is a close of this chapter and an interesting lesson for me while also highlighting that Japan culture and ethos is really changing in midst of Nikkei hitting all time high.

Hi specuvestor,

My memory of Isetan is one that forfeited one of the most Section 44 Franked credits because paying dividends will incur a lot more tax for the holdco in Japan. Despite all the protests from minorities during AGM and many other companies demonstrating issuing dividends and raising rights to replace the cash outflow.

I think I have replied to you previously on the part about tax credits. Isetan Singapore did paid out some of them eventually via dividend. The fact that it managed to accumulate so much tax credit meant that it is not a bad company. If a company keeps on losing money, how could it had accumulated so much tax credits throughout the years?

And even if they paid out little dividends, profits will be retained in the company, which results in increase in NAV/RNAV. That will all be taken into consideration when IFA determines whether the scheme is "Fair and Reasonable" or not.

But if you look at the actual fact, recent years they have been barely profitable or making losses. That resulted in accumulated losses which meant that they could not pay out dividends unless they are profitable within a financial year. So recent years of low dividends is because of their performance, and not because that they purposely hold back dividends due to any other reasons.

[weijian]

The Japs have arranged this privatization via a SOA - meaning they want to own and then delist 100% of the entity.

Last 1 month VWAP before announcement: $2.63
Offer price: $7.20
Current share price: $7.11
Market pricing in odds of success = 1 - (7.2-7.11)/(7.2-2.63) = 1 - (0.09/4.57) = 1 - 0.02 = 98%

Market believes SOA and the IFA opinion will be favorable to the Offerer, allowing an eventual privatization while also throwing in a wild card of a higher offer. In other words, is anyone willing to sell insurance for <2% premiums that it will not go through?

Ise-time for change? A look at Isetan’s 54-year history in Singapore

https://www.businesstimes.com.sg/compani...-singapore

[dreamybear]

The Japs have arranged this privatization via a SOA - meaning they want to own and then delist 100% of the entity.

Last 1 month VWAP before announcement: $2.63
Offer price: $7.20
Current share price: $7.11
Market pricing in odds of success = 1 - (7.2-7.11)/(7.2-2.63) = 1 - (0.09/4.57) = 1 - 0.02 = 98%

Market believes SOA and the IFA opinion will be favorable to the Offerer, allowing an eventual privatization while also throwing in a wild card of a higher offer. In other words, is anyone willing to sell insurance for <2% premiums that it will not go through?

Ise-time for change? A look at Isetan’s 54-year history in Singapore

https://www.businesstimes.com.sg/compani...-singapore

Scheme document finally out - final price confirmed, IFA opinion given; looks like Mkt is "efficient".   

The next question - will it be successful ?

https://links.sgx.com/FileOpen/Isetan%20...eID=809484
"....the Scheme Consideration is within the estimated value range of the Shares of S$7.04 and S$7.79 per Share...."

[weijian]

The Japs have arranged this privatization via a SOA - meaning they want to own and then delist 100% of the entity.

Last 1 month VWAP before announcement: $2.63
Offer price: $7.20
Current share price: $7.11
Market pricing in odds of success = 1 - (7.2-7.11)/(7.2-2.63) = 1 - (0.09/4.57) = 1 - 0.02 = 98%

Market believes SOA and the IFA opinion will be favorable to the Offerer, allowing an eventual privatization while also throwing in a wild card of a higher offer. In other words, is anyone willing to sell insurance for <2% premiums that it will not go through?

Ise-time for change? A look at Isetan’s 54-year history in Singapore

https://www.businesstimes.com.sg/compani...-singapore

Scheme document finally out - final price confirmed, IFA opinion given. Mkt is "efficient".   

The next question - will it be successful ?

https://links.sgx.com/FileOpen/Isetan%20...eID=809484
"....the Scheme Consideration is within the estimated value range of the Shares of S$7.04 and S$7.79 per Share...."

From pg84 onwards, we can roughly understand the IFA's methodology to derive the "estimated value range".

- The lower range "$7.04" is taken from the VWAP (vol weighted avg price) after the SOA announcement. Basically IFA puts faith in Mr Market (or those merger arbs who are ok to accept 2-3% premiums in exchange for providing protection to sellers that the SOA doesn't go through.

-  The upper range of "$7.79" is taken from the median P/RNAV ratio (0.76x) of all takeover of listed property entities in the last 5 years - regardless of whether they are successful or not (although mostly successful) but more importantly, regardless of whether the offer is fair and reasonable. In other words, it means that "not fair" offers will influence this number - So the lower the offer prices, the more of such "not fair" offers, will depress the median statistic.

- There is another price "$7.28" stated out, been the mean of the P/RNAV ratio (0.71x) of all takeover of listed property entities in the last 5 years. Since the population is been skewed by outliers (on the low P/RNAV side), we could argue that it isn't a robust statistic.


Some thoughts:

(1) The IFA now has a choice of $7.04 (0.68x of RNAV), $7.28 (0.71x of RNAV) and $7.79 (0.76x of RNAV). With the offer price of $7.20 (0.70x of RNAV), no surprises which numbers it chosen. Anyways, we know valuation is "more art than science".

(2) In the population provided, there was only 1 company Memories Group, been taken over around RNAV, which was 1.02x. Most other offers were predictably closer to (or lower than) the median of 0.76x. So I think it is reasonable to conclude that RNAV remains more theory than practical, especially when it is time to realize it.