Mandatory general offer at S$0.57/share
? NHPEA to acquire 59.8% of APAC; makes mandatory general offer for
remaining shares at $0.57/share.
? Offer price appears low, at 7-8x FY22F P/E multiple, vs. comparable peers.
? Reiterate Add rating with an unchanged TP of S$0.93.
Unconditional mandatory general offer for APAC’s shares at S$0.57
NHPEA Ace Realty Company (NHPEA), an entity controlled by Morgan Stanley Private
Equity Asia (MSPEA), announced it has agreed to acquire 59.8% of APAC for S$129.5m
(based on an offer price of S$0.57/share and inclusive of the rights to receive and retain
the FY21 final dividend of 4 Scts/share; book closure date: 29 Apr 2022). The shares will
be acquired from Asia Pacific Realty Holdings, an entity controlled by Northstar Group, a
Singapore headquartered private equity firm. Following this transaction, NHPEA intends to
make an unconditional mandatory general offer for all outstanding shares in APAC at an
offer price of S$0.57/share. The offer is unconditional. The completion of the deal is subject
to consent from the “ERA” master franchisor and its affiliates for the change in control of
the company as well as consent from DBS Bank, the lender of a term loan to the company.
Management of APAC including Mr. Jack Chua (Executive Chairman), Mr. Eugene Lim
(Key Executive Officer) and Mr. Poh Chee Yong (Chief Financial Officer) have provided an
irrevocable undertaking to the offeror not to tender their shares in acceptance of the offer
or to dispose their shares.
Potential for stronger growth through MSPEA’s global network
APAC is MSPEA’s first and only investment in real estate services sector in Southeast
Asia. APAC is one of the leading real estate service providers, holding the exclusive ERA
regional master franchise rights for 17 countries in Asia Pacific. MSPEA, with its expertise
in investing in highly structured minority investments and control buyouts in growthoriented companies in Asia, could potentially further build and support APAC’s growth by
leveraging on their global network and experience in growing businesses across Asia.
Upon the completion of the deal, the offeror may undertake a strategic and operational
review of the company with a view to realising synergies, economies of scale and cost
efficiencies and growth potential.
Offer price of S$0.57 is low vs. comparable and small-cap peers
The offer price of S$0.57 is at a 30.06% and 26.83% discount to APAC’s last traded and
1-month VWAP price. Based on the price of S$0.57, the transaction is valued at c.7x
FY22F P/E multiple, based on our estimates (or c.8x based on Bloomberg consensus
estimates). This is much lower than the 10x ex-cash P/E multiple of its nearest comparable
peer PROP, and also lower when compared to the 10-12x P/E multiple of other small-cap
companies.
Reiterate Add rating
We keep our TP of S$0.93, based on an unchanged blend of net cash-adjusted P/E
multiple and DCF valuation, pending more details from the offer document. While its nearterm share price performance could be affected by the proposed offer price, we believe
this would also set a support level for APAC’s share price. Potential re-rating catalysts:
ability to further grow its business across its footprint. Key downside risk: delayed recovery
of the property market due to a weak macroeconomic outlook.