UIC could pay a maximum of S$762m to privatise Singapore Land

But S$9.40 offer price still considered "low".

UIC has made an unconditional cash offer for all the issued and paid-up ordinary shares in the capital of Singapore Land (Singland), at an offer price of S$9.40 per share, but DBS Equity Research considers this takeout price to be quite low, representing a 28% discount to Singland's book value.

DBS added that the price -- which will see UIC pay a maximum of S$762m for the remaining 19.6% stake in Singland -- is slightly below its target price of S$9.62, and is below the average c23% discount to book values for the listed property developers in Singapore.

"UIC needs to accumulate only 9.6% stake in Singland to hit 90% for the privatization to be successful. Key to the proposed privatization being successful will be the acceptance from a major shareholder - Silchester International Investors LLP, which has been a long term shareholder and currently holds a c8.2% stake in Singland," said DBS.

"If successful, the privatisation offer for Singland would be accretive for UIC as the latter can now account for the assets directly and will not need a company TP discount. Imputing a 100pct stake of Singland and taking out the S$761.7m to buy the remaining shares would boost UIC’s RNAV to S$3.52/share. Despite the change in RNAV, UIC is not cheap, trading at 12% discount to revised RNAV, hence we maintain our HOLD call on UIC," DBS added.