SelProp...Jan 2009

It has 33 acres of prime land in the Klang Valley suburb.

Kayin, a vehicle controlled by the Wen family, which is led by matriarch Puan Sri Chong Chook Yew, has since Oct 2008 bought over one million SelProp shares on the open market. It paid an average of RM2.60 a share or between RM2.37 and RM2.88 apiece. The latest purchase of 17000 shares was made on Jan 5 2009 at Rm2.75 each.

It is trading at just over half (0.55 times) its net tangible asset (NTA) per share of RM5.03 for the year ended Oct 31, 2008. The discount is magnified if one considers the RM523 million or RM1.52 cash per share it has in its books.

Will the controlling shareholder Kayin – which already controls 61.52% of SelProp mount a privatization swoop? Cash is not a major issue should it consider such a move. The RM523 million cash in SelProp’s books is more than enough for Kayin to pay as much as Rm3.96 a share for the 132 million shares it does not already own to privatize the company.

The question is, does Kayin have the motivation to made another VGO for SelProp?

Today (Jan 2009), SelProp would have a RM3.37 if one were to peg its price at 0.67 times its NTA of RM5.03. At Rm3.37 (22.5% gain from RM2.75) apiece, a privatization offer fro SelProp would cost Kayin some Rm445 million.

The theoretical RM445 million is less that the carrying value of the development landbank SelProp has in its books of Rm465 million. SelProp has another RM496 million worth of investment properties and only about RM120 million of short term borrowings and payables as at end Oct 2008.

However, prospects in 2009 are uncertain. Expectations are that the company will delay the launch of two of its major development projects in Damansara Heights given the softer real estate market.