Sungei Bagan stands to own M$2.93 per share worth of S'pore-listed Great Eastern

On Friday, sister co. Kuchai proposed to sell all its significant assets, sans M$83 mil cash, to it, including 3,032,000 of tightly held Great Eastern(trading above S$17), additional to its own 1,733,000 shares in the insurer, which is itself 89% owned by the republic's giant OCBC Banking Group. The price tag is a mark-to-market M$275 mil, for which Sungei Bagan will issue 27.5 mil shares enlarging its issued share base by 41.5%. 

 However, because the issue will be pegged at close to the latter's NTA(@M$10.01), it will only be paying less than RM$90 mil worth of its own shares  for assets potentially sellable at almost 3X that market value. Kuchai will then turn around & gift those shares back to its shareholders, which, based on their market value, will amount to about 71 sen per share which last traded @ M$1.25, a more enhanced version of a similar exercise last year when 47 sen worth of Sungei Bagan was handed over as a dividend-in-specie, leaving 65 sen per share of net cash not part of this deal.

I predict that Kuchai's market price will rise to at least M$1.60 on Jan 2nd '24 while Sungei Bagan may also attract significant buying interest given that its Great Eastern stake alone will be conservatively worth a mere 10% discount to its entire enlarged market cap, which means new shareholders will pay a premium of only 32 sen to own the rest of the following significant assets : its two pricey adjoining Victorian London flats worth over M$70 mil, a conservation shophouse in S'pore worth over M$50mil, all fully tenanted, an 8 acre piece of Selangor land valued at nearly M$8 mil in the market, its long-held sprawling Kelantan plantation lands valued at over M$100 mil as well as a cash pile of over M$150 mil. Any price for Sungei Bagan going for M$3.30 or less on Jan 2nd '24 is worth snapping up for an anticipated rise to at least M$4.00 over the course of the next year or so! This is a conservative estimate despite these shares having traded at a 54-66% discount to book over the last 10 years & perhaps even longer back.

The most liquid assets of the post-acquisition company, namely the Great Eastern shares & the cash pile, will be worth M$3.66 per enlarged share cap, with the rest of the combined assets gratis if the market price does not move significantly. This minimum figure should underpin the value of Sungei Bagan's shares in the coming months.