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Undervalued when listed? Some cases.

One major reason why companies love to get listed is to have access to funds from the market. In fact, majority of all the recent billionaires were all due to their companies getting listed. Think Alibaba, think Facebook. The owners are now way richer than majority of all those who built their wealth over a much longer period of time. Agree? If so, why then do companies wanting to get themselves privatised; delisted? Especially these days, one major theme would be the privatisation of listed developers.
IJM Land would be delisted from Bursa and the deal is expected to be concluded in early April. Once it is privatised, it will no longer belong partially  to the public but would be fully owned by IJM Corporation Berhad. If you still wish to take part in IJM Land’s activities, just buy IJM Corporation Berhad’s share. Many analysts are positive with this deal and expects IJM Land to be much stronger because it would then have a much larger balance sheet and scale when it needed to undertake even larger projects.
One of Penang’s most well known developer, Hunza Properties would also be privatised soon if its major shareholders are successful in buying up the remaining shares from the public. Currently, the public owns about 41% of Hunza Properties. The offer is of course at a premium of nearly 30% to Hunza’s market price of RM1.93 over a six-month period. It’s share price is currently trading at RM2.10  It’s not amazingly attractive but truth is, when we look at how the share price has been moving, it is not really going anywhere.
The main reasons for these two delisting as we can see is very clear for the major shareholders. They do not need the cash anymore and without the company being listed, they can run the company in a manner they want instead of having to always be under public scrutiny. Besides, if they are cash rich and needs a place to invest, the best place might be a company they know best. In this case, it’s the developer company they partially own. For the public, I think they can just accept the slight premium being offered and use the money to buy other stocks. If they want, there are still many other property developer counters for them to choose from.
I do not own any units of Hunza or IJM Land but yes, recently I bought two developer stocks just for fun. Fun meant just 2,000 units. If the stock price goes up, I get a good dinner and a short break for my family (Cameron or Genting). If down, just hold for dividends then. Thus, do not be too surprised if developers who are doing quite well suddenly announce that their major shareholders are taking them private. This may even happen if the stock is totally undervalued and the major shareholder is unhappy with this.
written on 22 Mar 2015
Next suggested article: IJM Land and recurring income strategy
 

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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