Morningstar Equity Research analyst Xavier Lee continues to recommend investors reject Aelios’ revised cash offer of $1.19 per unit for Suntec REIT as it “does not reflect the REIT’s intrinsic value”.
While the offer is a 2.6% improvement from its previous offer of $1.16, it still falls below Lee’s fair value estimate of $1.38 per unit of Suntec REIT.
“We believe the revision of the offer price is to comply with the Singapore code on takeovers and mergers, as Aelios acquired 18 million shares in the open market for $1.19 per unit,” Lee writes in a Jan 9 note.
According to the code, Aelios must match or exceed the price paid in the open market to ensure fair treatment of all shareholders.
As such, Lee still does not believe that Aelios intends to take Suntec REIT private with this offer. The closing date of the offer has also been extended to Feb 3 from Jan 20 previously.
As at Jan 8, Aelios owns 33.32% of the units in Suntec REIT. According to the code, a mandatory offer is triggered when a shareholder or offeror acquires 30% or more units in a REIT. The offer will be conditional upon Aelios receiving 50% or more of the units in Suntec REIT.
See also: Suntec REIT unitholders should reject Aelios’ ‘unattractive’ $1.16 cash offer: Morningstar
“Given that the REIT’s unit price has rallied above $1.19 at the open, we think that investors can get more value by selling in the open market as opposed to taking up this offer,” says Lee.
Lee had given Suntec REIT a four-star rating against Morningstar’s five-tier scale in an earlier note, issued Dec 6, 2024. As at Jan 9, Lee has downgraded Suntec REIT to three stars. This "indicates that investors are likely to receive a fair risk-adjusted return (approximately cost of equity)”, according to Morningstar.
As at 10.40am, units in Suntec REIT are trading 1 cent higher, or 0.83% up, at $1.22.
