Tuesday, May 4, 2010

A new substantial shareholder enters

Singapore-based Fields Equity Management has emerged as a new substantial shareholder in Plenitude since April 23, 2010, after acquiring the entire stake previously owned by long-time shareholder Ms Ong Bee Kuan in an off-market transaction. The deal was done at RM2.54 or a 14.5% discount to the share’s closing price that day (The Edge).
Ms Ong was a passive investor. Ms Ong had been a substantial shareholder in Plenitude since the IPO days in 2003, and had made limited changes in her stake since then. As she is a passive investor and was not in any way, directly or indirectly, involved in the management of Plenitude, her exit will therefore have no material impact on the company’s management structure and prospects. Although the disposal price represented a significant 49% discount to Plenitude’s NAV of RM5, we view Ms Ong’s stake disposal as a move to realise profit from her investment in the company, as the shares were at a significant 60% premium to the IPO price of RM1.60. Ms Ong is known to have been a businesswoman since 1997. She was a minority shareholder of The Nomad Group (not rated), another listed real estate company, until she cashed out from the company recently.
Who is Fields Equity? Other than the fact that it was incorporated in the British Virgin Islands with an office in Singapore, little else is known about Fields Equity Management as
checks with the management also drew a blank. Having said that, we believe Fields is a private-equity firm which probably has notable figures behind it. How the entry of this new substantial shareholder may affect the composition of Plenitude’s management team and the company’s direction and prospects, however, remains to be seen.
Taking the opportunity to upgrade to TRADING BUY. We have been contemplating an upgrade on Plenitude’s fair value for some time as we believe that a broad sector rebound starting from late 2010/early 2011 will soon spur investment interest in fundamentally-sound and still-undervalued property stocks. As we also believe that most mid- to big-cap stocks have somewhat fully priced in the anticipated rebound, value can now only be found in the smaller cap property stocks such as Plenitude as they are trading at a significant discount even to the mid-cap ones. When the 2011 rebound comes, the risk premium on smaller cap stocks is likely to fall and the valuation gap narrow. Using the current valuation of certain small-mid cap stocks such as Glomac and KSL Holdings as a benchmark (see Figure 1), we now value Plenitude at 0.71x CY2010 P/NTA, which gives the stock a new CY2010 target price of RM3.84 (from RM2.81 based on 0.52x CY10 P/NTA previously). The upgrade is also supported by the company’s anticipated strong earnings growth, robust balance sheet with a net cash of RM1.82/share, and the fact that it is current trading at a significant 39% discount to its NAV.

source: OSK Research 04 May 2010

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