Once the privatisation is completed, Straits Trading will swap its 20.1% stake in ARA for a 20.95% stake in a company that indirectly owns ARA.
Based on the current offer price, Straits Trading will also unlock $48.2 million in cash which can be redeployed.
“Straits Trading will also retain exposure to ARA’s unique value proposition; note that STC will be the only SGX-listed entity that is a significant proxy to ARA after its potential privatisation,” says Lee.
At present, Straits Trading’s assets in Singapore include eight GCBs and nine units in Gallop Green, a freehold residential development.
OCBC is forecasting for domestic residential prices to bottom and recover in FY18 and believes Straits Trading may explore a divestment of these assets ahead, unlocking more than $260 million in cash to be redeployed accretively.
In addition, significant value may be realised from the potential revaluation and redevelopment of a land site in Butterworth, Penang, belonging to 54.8% owned subsidiary Malaysia Smelting Corporation.
Finally, Straits Trading is the investment advisor for the newly listed NikkoAM-STC Asia ex Japan REIT ETF which Lee sees recurring fee income growth for the latter as the ETF’s AUM increases ahead.
“We believe STC’s core competitive strength lies in the group’s sharp ability to allocate capital while leveraging on synergies across a wide-reaching eco-system of real estate partners,” says Lee.
Shares of Straits Trading up 8 cents at $2.35. Year to date, the stock has advanced 18.1%
