CMA shareholders should stand their ground against 'fair offer'

THE CapitaLand (CL) offer for the 35 per cent of the CapitaMalls Asia (CMA) shares they do not own is yet another example of the lack of respect for minority shareholders. The post-IPO performance of CMA shares and the paltry premium over the IPO price and book value multiple should concern all CMA shareholders.

At the November 2009 CMA IPO, all of the proceeds went to CapitaLand and none were invested into CMA. Thus the IPO and current offer are just asset trades for CL with no strategic benefit for CMA shareholders. Prior to the IPO, CL shares peaked at $8.60 and during the financial crisis fell almost 80 per cent. A few months later, CMA's IPO was priced at $2.12, closed the first day at $2.30 and the multiple of book value offered was 1.55x. The current offer of $2.22 is valued at a thin 1.2x book value.

Yet, now more than four years later, CL wants to pay only a 4.7 per cent premium to the IPO price, a 3.4 per cent discount to the day one closing price and a 23 per cent discount to the IPO book value multiple. Has CMA really deteriorated that much over the last four years?

At the time of the IPO, CMA had 59 completed projects and today there are 85, a 44 per cent increase. In 2013 vs 2012, revenue, profit and the asset value per share were all up about 10 per cent and operating income increased a whopping 40 per cent. Looking back to the IPO, in 2009, profit was $388 million and for 2013 it was $600 million, an increase of 55 per cent. Total equity in 2009 was $5.5 billion and at year-end 2013, it is $7.2 billion, more than a 30 per cent increase. So operating performance since the IPO has been quite strong and hardly justifies a discounted multiple to book value and a discount to the closing price after the IPO.