SC Global Developments Ltd. (SCGD) jumped to the highest in more than 2 1/2 years in Singapore trading after Chief Executive Officer Simon Cheong offered S$745 million ($611 million) to take the luxury property developer private.
The stock surged 50 percent to close at S$1.805 in Singapore trading, the highest price since April 2010. That exceeds the $1.80 Cheong said he will pay. The CEO plans to delist the company and gain greater flexibility to manage and plan its residential property business without having to report its performance on a quarterly basis, SC Global said in a statement to the Singapore stock exchange yesterday.
Cheong, who already owns 55 percent of the company, is taking SC Global private as he’s planning new projects in the city’s downtown with home prices at a record in the third quarter. The developer hasn’t accessed the capital markets for funds for at least six years and low liquidity of shares “limits the usefulness of a public listing,” Cheong said.
“SC Global has been able to establish benchmark pricing for its luxury residential projects and is known to be reluctant to cut prices to move sales,” Goh Han Peng, an analyst at DMG & Partners Securities Pte in Singapore, said in a report today, adding that the offer “represents a decent premium given the sluggish sales for the high-end residential segment and the company’s deliberate low turnover strategy.”
The stock was halted from trading on Dec. 3 for the announcement. Today’s increase pushed gains this year to 82 percent, making it the best performer on the Singapore property index this year after Wing Tai Holdings Ltd. (WINGT) Still, the stock is about half of its peak in June 2007.
Singapore home sales may fall as much as 27 percent in 2013 after climbing to a record this year as six rounds of housing curbs by the government crimps demand, according to Jones Lang LaSalle Inc. Private home sales next year may drop to 16,000 units from 22,000 units this year, the property consulting company said last month.
“Considering the very low likelihood of potential counterbids, we advocate that shareholders take up the offer and realize the value on their SC Global investment,” Sarah Wong, an analyst at AmFraser Securities Pte. said in a report today. “SC Global lacks catalysts to unlock share value otherwise.”
The city’s home prices climbed to a record in the third quarter, prompting Finance Minister Tharman Shanmugaratnam to say in October that the real estate market may get “bubbly.” The government won’t allow home prices to outstrip gains in incomes, he said.
The Monetary Authority of Singapore or the central bank told banks on Oct. 5 to restrict home-loan maturities “to curb continued upward pressure on residential property prices,” in its latest attempt to avert a housing bubble. The government said in September it plans to cap the number of homes that can be developed in suburban projects as it seeks to curb the increasing trend of so-called shoebox apartments.
In December last year, the government imposed an additional stamp duty on foreigners and corporations buying property, and additional levies on permanent residents buying a second home and citizens purchasing a third residential property.
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