Business Times Breaking News
Global
Mapletree Investments to evaluate options to monetise student housing assets
Nisha Ramchandani
Nisha Ramchandani
594 words
30 August 2021
Business Times Singapore
STBT
English
© 2021 Singapore Press Holdings Limited
MAPLETREE Investments will evaluate various options to monetise its portfolio of student accommodation assets over the next few months. These options include a public Reit or private fund, it said.

This comes after it acquired four purpose-built student accommodation (PBSA) assets in the United Kingdom from Vita Group for over .ú165 million (about S$306 million), further expanding its student housing footprint in the UK.

The four assets total 917 beds in all - a 156-bed asset in Exeter, a 132-bed asset in Bristol, a 308-bed asset in Leeds as well as a 321-bed asset in Nottingham. They are strategically located within walking distance to Russell Group Universities as well as in close proximity to amenities such as town centres and train stations, Mapletree highlighted in a release on Monday. Vita will be tapped as the operator for the four assets.

Chua Tiow Chye, Mapletree's deputy group chief executive officer, said: "This acquisition of four high-quality assets will enhance the scale and reach of our PBSA presence in the UK. This also underscores our commitment to grow the student accommodation sector as a stable and resilient asset class, with growth anchored by strong underlying and positive demographic and student enrolment trends."

With this, Mapletree's student accommodation portfolio will total 55 assets worth about S$4 billion, with over 23,000 beds across 37 cities in the UK, the United States and Canada. About 60 per cent of these beds are held by Mapletree's private fund, Mapletree Global Student Accommodation Private Trust.

In response to queries from The Business Times on whether Temasek-backed Mapletree would consider spinning off its PBSA assets into a Reit, Mr Chua said: "As part of our business model, we will be evaluating over the next few months the various options of monetisation, which include syndicating the assets we have acquired into a public Reit or a private fund."

Mr Chua also said that the PBSA markets in the UK and US are showing strong signs of recovery as schools re-open for the new academic year, while the high vaccination rates have resulted in robust pre-leasing rates of student beds for the next academic year.

Centurion Corp, which owns PBSA assets in markets such as the UK and US, is also seeing demand pick up. "We are seeing an increase in demand from students, mainly in the United Kingdom, United States and Korea," said Centurion's chief executive officer Kong Chee Min. Centurion has 19 operating PBSA assets with nearly 6,100 beds in the UK (2,815 beds), US (2,145 beds), Australia (896 beds) and Korea (208 beds).

Centurion had pre-sold over half of its bed capacity as at end June in the UK for the upcoming Academic Year 2021/2022, and pre-bookings have increased further since then. Mr Kong added: "We're seeing clear signs of a recovery emerging in the UK, and continued growth in occupancy in the US."

With the re-opening of travel in the UK, there has been increased enquiries for bookings from international as well as domestic students.

On the other hand, Centurion's US portfolio - which managed to chalk up higher occupancy last year - was not impacted by the pandemic in 2020 as international students account for less than 2 per cent of its US portfolio occupancy.

Shares in Centurion closed at 33.5 Singapore cents on Monday, down half a cent or about 1.5 per cent.

Singapore Press Holdings Limited

Business Times Breaking News
Global
Mapletree Investments buys four student housing assets in UK for over .ú165m
Nisha Ramchandani
Nisha Ramchandani
327 words
30 August 2021
Business Times Singapore
STBT
English
© 2021 Singapore Press Holdings Limited
Mapletree Investments has acquired four purpose-built student accommodation (PBSA) assets from Vita Group for over .ú165 million (about S$306 million), expanding its student housing footprint in the United Kingdom.

The four assets total 917 beds in all - a 156-bed asset in Exeter, a 132-bed asset in Bristol, a 308-bed asset in Leeds as well as a 321-bed asset in Nottingham. They are strategically located within walking distance to Russell Group Universities as well as in close proximity to amenities such as town centres and train stations, Mapletree highlighted in a release on Monday. Vita will be tapped as the operator for the four assets.

Chua Tiow Chye, Mapletree's deputy group chief executive officer, said: "This acquisition of four high-quality assets will enhance the scale and reach of our PBSA presence in the UK. This also underscores our commitment to grow the student accommodation sector as a stable and resilient asset class, with growth anchored by strong underlying and positive demographic and student enrolment trends."

Mr Chua went on to add that the PBSA markets in the UK and United States are showing strong signs of recovery as schools re-open for the new academic year, while the high vaccination rates have resulted in robust pre-leasing rates of student beds for the next academic year.

With this, Mapletree's student accommodation portfolio will total 55 assets worth about S$4 billion, with over 23,000 beds across 37 cities in the UK, the US and Canada. About 60 per cent of these beds are held by Mapletree's private fund, Mapletree Global Student Accommodation Private Trust.

Mark Stott, chief executive of Vita Group, said: "In securing this deal, it provides the business with the capital and the confidence to continue to develop the Vita Group platform to thrive, with an ever-increasing future pipeline of projects."

Singapore Press Holdings Limited

About time but too bad I left reits for options long time already or else would be interested in it.

Never bother looking. Cause 30% tax hence not interested. The only us REIT I want to buy if no tax is prologis, WP Carey, extra space storage and Equinix. Anyway with 15-20%p.a premium in my options, I don't bother anymore with reite and dividend stock. What I have I just keep and slowly trim. Anyway off topic.

Bro, can share what stock u use to do option trading? Selling calls and puts?

Sector Watch: Looking back at why REITs outperform
Goola Warden
by Goola Warden (goola.warden@bizedge.com)
2320 words
6 September 2021
The Edge Singapore
EDGESI
English
© 2021 The Edge Publishing Pte Ltd. All Rights Reserved.
Since Sept 2002, which is as far back as the FTSE REIT Index goes, REITs have outperformed the Straits Times Index by two times. Including distributions reinvested, the FTSE REIT Index has gained 520% these 20 years while the STI, with dividends reinvested, is up just 242%.

In the past 10 years, the FTSE REIT Index has done three times better than the STI. This is not just based on dividends and yield alone but also on price appreciation. Since the Global Financial Crisis (GFC), and following the European sovereign debt crisis, the interest rate cycle has been in favour of REITs, with quantitative easing and interest rates remaining at generational lows. Some 38 listed REITs now account for around 10% of Singapore’s market capitalisation.

Of course, there have been outperformers and underperformers. As the first REIT market in Asia, outside of Australia, the Singapore REIT sector started with developer-sponsors and the external manager model, which was largely copied by the rest of Asia, with the exception of Asia’s largest REIT, Link REIT, which is internally managed.

The sponsor-external manager model worked moderately well, despite some hiccups. Unsurprisingly, the best performers are those with strong, committed sponsors who are able and willing to provide a pipeline, and more importantly, to backstop any capital-raising that is required of the REIT. These REITs command lower cost of capital, including lower cost of debt and are able to access bank loans during periods when system liquidity falls.

With economies of scale, these sponsors are able to provide property management services for their REITs, which gives them an additional advantage. Another plus for REITs with strongly committed sponsors is their size. Because of sponsor support, they have been able to grow, and the larger and more liquid they are, the more investors they attract, and they are likely to have an institutional following.

In a handful of cases, managers who put the interests of unitholders ahead of those of the sponsors — ParkwayLife REIT is an example — have also outperformed.

Financialisation of real estate

In 2002, just as The Edge Singapore got off the ground, an important development was taking place in real estate — it was being financialised through the launch of Real Estate Investment Trusts (REITs). In 2000, a merger between DBS Land and Pidemco — both of which had large amounts of debt on their balance sheets — formed CapitaLand. In order to lighten its balance sheet, CapitaLand securitised its malls in a vehicle, Singapore Property Trust, which failed to get off the ground as Singapore’s first listed REIT.

The assets were subsequently repackaged and placed in CapitaMall Trust (CMT). Still uncertain of the reception for an IPO of a REIT, CapitaLand’s second REIT, CapitaLand Commercial Trust (CCT) was given to CapitaLand shareholders as a dividend-in-specie. Eventually, CMT was renamed CapitaLand Mall Trust and merged with CCT to form CapitaLand Integrated Commercial Trust, the largest externally managed REIT in Asia.

Separately, Ascendas as it was then known, listed Ascendas REIT where Ascendas partnered Goodman Group to be Ascendas REIT’s manager. Eventually, Goodman sold its stake in the manager to Ascendas. Fast forward to this year, and Ascendas is part of CapitaLand, which in turn is being restructured into Capita­Land Investment (CLI).

In 2005, unlisted Mapletree Investments launched Mapletree Logistics Trust (MLT). Following a five-year hiatus, three Mapletree REITs were launched in quick succession: Mapletree Industrial Trust in 2010, Mapletree Commercial Trust in 2011, and Mapletree Greater China Trust, which was renamed to Mapletree North Asia Commercial Trust in 2013.

The CLI and Mapletree REITs continue to be well supported by their sponsors which are likely to continue to provide their REITs with pipeline, form JVs to redevelop older properties and support equity fundraising when needed. Being part of the sponsors’ families have helped these REITs access cheaper debt and lower cost of capital when fundraising.

A supportive manager

In July this year, investors were heartened by the steps taken by Yong Yean Chau, CEO of ParkwayLife REIT’s manager, to keep unitholders’ interests front and centre as he renegotiated a new master lease agreement with sponsor IHH Healthcare for the REIT’s three Singapore hospitals.

“I stressed it is not about how much rental I can get. Our objective is far more than that. It is about how to support our operator to be even more successful. Healthcare expenditure will grow in the region and the stronger players will be in a position to capitalise. The end objective is to help the operator compete. When the operator faces difficulty and loses market share it will affect the landlord and tenant default risk. Rental affordability is a big issue. Can the tenant pay me this rental for 20 years? The collaboration comes in the form of the landlord providing the tenant and operator with a platform to improve profitability,” Yong had said in an interview with The Edge Singapore in July.

ParkwayLife REIT’s new master lease agreement, which runs for 20 years, lifted rents, and as a result, the assets were revalued upwards. The starting point of the original master lease, though, was that the rent it receives can be no more than 15% of revenue, leaving sufficient room on the table for the master lessee to meet its master lease obligations.

In stark contrast, First REIT’s manager and its CEO Victor Tan struggled to make unitholders’ concerns known to its master lessee and former sponsor, Lippo Karawaci, and Siloam International Healthcare Hospitals, the hospital operator. First REIT owns 15 hospitals and a hotel and country club in Indonesia. Ahead of the expiry of its master lease, Lippo Karawaci unilaterally informed the manager and the REIT unitholders that it could no longer afford to honour the old rental agreement and would default if the manager did not get its unitholders to agree to a new master lease agreement and raise equity to cover a shortfall in the REIT’s loan-to-value levels.

The new agreement shaved off around 40% of the REIT’s net asset value based on Dec 31, 2019, and almost 30% off its valuation based on Dec 31, 2020, data. Unitholders had to cough up monies through a dilutive rights issue.

REITs are not fee machines

While ParkwayLife REIT embodies why investors are attracted to REITs, managers and management companies have shown why some investors stay away from REITs. Back in 2002, just as CMT was getting off the ground, a property fund manager, ARA Asset Management, started operations. Its business model was for fee income from REITs and private equity funds. In 2003, Fortune REIT was listed, with suburban retail assets in Hong Kong. Its sponsor was Cheung Kong, now renamed CK Asset Holdings, and ARA owned the manager. This worked because at the time Cheung Kong was a major shareholder of ARA.

Fortune REIT persistently traded at high yields because local retail investors did not quite understand the structure of Hong Kong’s suburban retail market. It was eventually dual-listed in Hong Kong, where investors are more familiar with its assets. In 2019, Fortune REIT was delisted from the SGX.

In 2004, ARA listed its largest REIT, Suntec REIT, which to date has not had a major fundraising exercise. In the initial years, the major unitholders of Suntec REIT were Hong Kong tycoons who acquired the land and built Suntec City, the largest asset in the REIT. The tycoons divested their stake in the property into the REIT in exchange for units. This was the first example of an “independent” REIT, where ARA owned the manager, and the Hong Kong tycoons owned the REIT. But, the tycoons eventually sold their stake.

Indeed, in its first 10 years or so, for investors in the IPO, Suntec REIT returned all the capital via DPU. However, as the tycoons divested, Tong Jinquan, a Mainland Chinese property tycoon acquired a 6% stake. As a result, ARA, together with Straits Trading which became an investor in ARA, bought up around 18% of Suntec REIT to “defend” it against marauders.

The perception that some managers grew AUMs to increase their fee income came to a head in 2015 when the Monetary Authority of Singapore issued a REIT code, which instructed managers to act in the interests of unitholders and encouraged REITs to benchmark performance fees against metrics such as DPU growth.

Cost of capital, equity fundraising

As can be seen in the example of Soilbuild Business Space REIT, which was listed in 2013 and delisted in April this year, a REIT trading at high yields faces challenges when it comes to acquisitions to spur growth.

For those with long memories, CMT, CCT and MLT all raised equity through dilutive rights issues in the aftermath of the GFC, when valuations of their properties declined. Investment properties in REITs are valued based on their cash flow, using a discounted cash flow (DCF) model. During the GFC, cash flow declined as interest rates rose temporarily, causing a disconnect in the markets. Hence, the need to raise equity.

At any rate, the GFC demonstrated the need for strong sponsors, good assets and a good manager. And often, these factors come as a trio.

Financial engineering

Market watchers are not sure when financial engineering started. Many feel it started with income support which vendors provided when selling properties to Keppel REIT and Suntec REIT at higher valuations than their passing rents indicated.

According to industry watchers familiar with valuations, financial engineering occurred near the inception of REITs, with the IPO of Cambridge Industrial Trust which listed in 2006. Like Suntec REIT, Cambridge Industrial Trust had a manager with little skin in the game. The major unitholders were parties that had sold their properties into the REIT for the sake of the IPO. The sellers then leased back their properties for a period of around five to 15 years.

It was pointed out at the time that the valuation of the properties depended on the terms of the sale-and-leaseback agreements. Rents, valuations and weighted average lease expiry (WALE) move in lock-step. The higher the rent and the longer the WALE, the higher the valuation.

First REIT, when it listed in 2007, unabashedly sold the hospitals of the IPO portfolio at high master lease rents and long WALE to boost valuations. However, in its defence, First REIT paid distributions for 14 years which would have enabled investors from IPO to recoup their initial investment.

Freight Links, which was renamed Vibrant Group, similarly sold its industrial properties into Sabana Shariah Compliant Industrial REIT at inflated master lease rents, to raise the value of the portfolio. Its financial engineering came to a head when The Edge Singapore pointed out in 2016 that the REIT planned a dilutive rights issue to acquire non-accretive acquisitions. That set the ball rolling for investor activism, led by Jerry Low, a stockbroker, who got sufficient unitholders to requisition an EGM to vote out the manager in April 2017. Low set in motion shareholder activism and investors became bolder and increasingly held their REIT managers to account.

Urban Commons, the sponsor of Eagle Hospitality Trust (EHT), took financial engineering to a whole new level with master lease rents and WALE agreements. In EHT’s IPO portfolio, Urban Commons offered investors 20-year master leases for 17 hotels which as a master lessee, it appeared unlikely to ever fulfil. In addition, Urban Commons capitalised future cash flows of the Queen Mary Long Beach, a stationary ocean liner, for 20 years and sold those cash flows into the trust for an upfront valuation of US$140 million.

EHT raised some US$568 million from investors for Urban Commons, some of whom were private banking clients of the sole manager and financial adviser, DBS Bank. EHT has divested most of its assets, supervised by the US bankruptcy courts, and is likely to be delisted in due course.

Since the EHT debacle came to a head, no REIT IPOs have materialised, although a handful has always been in the pipeline. Market watchers indicate that a REIT with a reputable sponsor is likely to list logistics properties in the next month or two.

Internalisation that failed

In the first decade of S-REITs, market observers debated on whether internally managed REITs were more efficient. However, the internalisation of Croesus Retail Trust’s (CRT) manager gave internalisation a bad name. CRT was styled as a business trust and did not have a sponsor which held units in the trust. CRT-owned shopping malls in Japan and traded persistently high yields, making it difficult for the trust to acquire properties and provide the manager with more fees.

The owners of the manager devised a scheme called internalisation and made the trust’s unitholders pay $50 million for the manager. The acquisition was part-financed by a 1-for-22 preferential offer of 27.7 million units at 79.7 cents a unit, which raised $22 million. The remaining $28 million was funded partly by $10 million that CRT had on hand, and partly by the proceeds of a $60 million bond issue. Soon after CRT was internalised, the owners of the manager sold the assets to Lone Star, paid cash to unitholders and dissolved the trust.

Since then, internalisation and the internal versus external manager model debate has taken a back seat in favour of a robust regulatory framework.

The CRT and EHT fiascos may have dented investor confidence and investor perception of S-REITs but investors have a short memory. More likely, these fiascos caused a flight to quality. The top 10 performers are REITs backed by good sponsors and managers.

The lesson learnt from the past 19 years is to stick with the winners no matter how compressed their distribution yields.

The Edge Publishing Pte Ltd

Sector Watch: The scandal of S-chips
by The Edge Singapore
2440 words
6 September 2021
The Edge Singapore
EDGESI
English
© 2021 The Edge Publishing Pte Ltd. All Rights Reserved.
A couple of years after The Edge Singapore came into existence in 2002, the darlings of the market were stocks of China-based companies that listed in Singapore, otherwise known as S-chips.

Actively pursued by the Singapore Exchange to revive interest in the stock market, S-chips allowed investors the partake in China’s rapid economic growth during the lead-up to the Beijing Olympic Games in 2008.

At one point, up to more than a hundred S-chips were listed. In 2004 alone, there were 40 such listings. However, these tended to be small issues, raising a total of just around $900 million among them.

By any measure, the S-chips were a colourful and diverse bunch. Not only did they come from every corner in China, they also came from diverse industries, living up to China’s reputation as Factory of the World.

There were textile and apparel makers like China Gaoxian Fibre Fabric Holdings and Great Group which manufactured lingerie. A handful focused on sports shoes and apparel like China Hongxing Sports, China Eratat and China Sports. There were foodstuff producers like Youcan Foods International which specialised in ice creams and potato starch makers China Essence Group and China Star Food Group. Then there were those from the heavy industries such as pulp and paper manufacturer Guangzhao Industrial Forest Biotechnology, steel miller Ferro­China and Fabchem China, the manufacturer of explosives for the mining industry. There was even China Milk the producer of bull semen that recorded net margins of up to a whopping 90%.

Typically, the holding company of S-chips was structured as an offshore entity based in Bermuda, the British Virgin Islands or the Cayman Islands. This holding company, in turn, held the operating subsidiaries and its assets in China.

To burnish their image, auditors were poached by some of these S-chip companies to fill the roles of financial controllers or even CFOs to lend them an air of legitimacy.

While most S-chips cited the need to raise capital for expansion as a reason for listing in Singapore, some readily admitted they did not lack funds but instead coveted the status of listing on “an international financial centre”.

For quite a few years, the whole S-chip party was in full swing. IPO managers flew up to China to attract prospective new listings, assess the suitability of listing applicants and lead them through the IPO process. Many other local market professionals hitched a ride too, including lawyers, auditors and consultants.

Site visits and plant tours were also organised for analysts of research houses, dealers and remisiers of brokerage houses and financial journalists where the highlight of the trips often took place in the after-dinner parties.

Fresh from the junkets, the remisiers would promote S-chips to their clients while the media would report on their bright prospects. When the stock went up after its IPO, many more investors jumped on the bandwagon.

Many of these S-chips were keen to be seen and heard. For example, The Edge Singapore (Issue 320, May 26, 2008) featured five S-chip stories. Three of the headlines captured the bullish prospects that were all too typical of these listings. China Paper looks to M&As to rapidly expand manufacturing capacity, China Merchants on the hunt for more toll roads and China furniture maker banks on strong domestic demand, referring to Cacola Furniture International.

However, two of the stories in Issue 320 also indicated that things were not always rosy in the S-chip universe and that investors had begun to wise up: These were China Oilfield clarifies seasonal losses, seeks recurrent revenue streams and Reyphon takes action to stem falling margins of essential plant hormone.

Of stolen trucks and office fires

By the end of the decade, cracks had started to appear in the whitewashed facade of some of these S-chips with sub-par corporate governance. Reports of accounting irregularities, loan defaults and missing cash began to surface with increasing frequency.

Retail investors went quickly into denial as one regulatory filing after another described all sorts of corporate malfeasances ranging from long-overdue receivables to significant overpayments to suppliers only to have these amounts written-off later.

Often, bosses of these beleaguered S-chip became uncontactable or went missing in action. Shareholders would only discover the existence of unauthorised loans taken up by local operating subsidiaries when the company announced it had received a letter of demand for payment from creditors. Another common problem was the unauthorised flow of funds from a local subsidiary to a third-party company linked to the same boss.

Independent directors blindsided by the rapid turn of negative events scrambled to appoint special auditors and set up committees to investigate the matter. However, when the audit committees asked to look at the company’s books, many were stonewalled.

In one infamous 2009 episode, the account books of China Sun Bio-Chem Technology were lost after the truck ferrying the accounts was stolen. When auditors from KPMG went to an office to start their investigations, power to the finance department was cut. When the power was restored, the hard disk in one of the four computers could not be detected. For Sino Techfibre in 2011 and China Paper Holdings in 2012, office or factory fires were cited as reasons for incomplete accounts.

In or around 2010, the endgame for S-chip was clearly in sight. Many retail investors got burned by S-chips. It was widely believed that the ownership structure of the S-chip companies where the listed vehicle is typically just an oversaes-incorporated shell, significantly insulated the majority shareholders and business owners from Singapore regulatory actions and accountability.

In late 2013, regulators put in place new rules. These included the so-called direct listing framework where China-incorporated companies could only list on the SGX with approval from the China Securities Regulatory Commission (CSRC).

To be clear, the majority of S-chips listed here are properly governed and law-abiding. Unfortunately, most investors here have had enough and their attention soon turned elsewhere. Among the surviving S-chips, a few delisted from Singapore and relisted on Hong Kong like China New Town Development while others delisted on their own or on the orders of SGX RegCo, which embarked on a deliberate “clean-up” exercise. Quite a handful remains suspended, leaving their long-suffering shareholders in limbo. A few, like Hu An Cable, tried to string together a business so that it could resume trading, but to varying degrees of success.

To be sure, the future isn’t completely bleak for China listings here. With SGX becoming a favoured hub for REITs, a couple of these trusts holding China-based property assets have listed in recent years, like EC World REIT and Dasin Retail Trust.

And to their credit, some wayward S-chips have even managed to reverse their fortunes. Most notable was China Aviation Oil whose management lost US$550 million betting on jet fuel derivatives the wrong way back in 2004. Following a high-profile restructuring exercise, the company is firmly back on track and remains listed here.

Not quite over

Unfortunately, even after these years, reports of S-chips getting into trouble still crop up occasionally — including that of aluminum parts maker China Haida just last April. Similar to some previous cases, the company’s subsidiaries in China received court orders freezing their bank accounts because of unpaid loans, which the Singapore-listed entity only became aware of recently. The CEO Xu Youcai also become uncontactable and its Singapore-based independent directors were left scrambling to appoint lawyers and forensic accountants to help shed more light on what had happened.

On Aug 3, as directed by the SGX RegCo via a notice of compliance issued on June 28, FTI Consulting has been appointed the special auditor to investigate the circumstances leading to the loans taken out by Xu, assess the “recoverability” of the company’s receivables and verify the bank balances.

To be sure, S-chips aren’t the only companies falling short of corporate governance standards or running afoul of the law. Still, each new case is one too many and to the credit of the regulators of the markets, they have taken numerous steps to address them.

Broadly, there is an underlying need to raise standards across the board. Regulators can be armed to the teeth but there will always be some motivated players who will find ways and means to get away with fraud or “creative accounting”. The whole ecosystem, including directors and auditors, have to commit to meeting certain minimum standards in the respective roles they play.

Also, given how the overall market environment is always changing, there will be new industries with their own attendant set of circumstances. Each new development or situation is in a way, a precedence. If regulatory frameworks are made absolutely watertight, they might suffocate rather than stimulate growth and a balance has to be achieved.

But that is not to say regulators and authorities prefer a more hands-off approach. One way to minimise the deliberate flouting of corporate governance standards is to build up a credible deterrent with various bodies ranging from the SGX, the Monetary Authority of Singapore, the Accounting and Corporate Regulatory Authority, the Commercial Affairs Department and even professional associations such as the Law Society of Singapore, Association of Banks in Singapore, Institute of Valuers and Appraisers Singapore (IVAS) and Singapore Institute of Surveyors and Valuers (SISV).

While these measures may have arrive too late for investors who were burnt by S-chips, the least this ecosystem can do is to minimise future damage.

‘Confessions’ from Oriental Century’s ex-CEO

Private education company Oriental Century was listed on June 1, 2006, at an IPO price of 35 cents. Riding on the presumption that education was a big business in China, the stock ran up to as high as $1.64 by February 2007, valuing the company at $272.5 million. For two full years after its IPO, Oriental Century reported better earnings and cash holdings. However, in March 2009, the company announced that executive chairman and CEO Wang Yuean had “substantially inflated” its FY2008 balance sheet and that the former prosecutor in China’s navy had resigned.

As The Edge Singapore (Issue 381, Aug 3, 2009) had reported, Wang had siphoned off money to a privately-held company Baisheng Investment that actually operated the school. Oriental Century, the Singapore-listed entity, owns the physical premises of the school and the land and generates its revenue from the management fees from the school.

As Wang told our former associate editor Leu Siew Ying, he did so to help Baisheng Investment reduce its debt and not for personal gain. “I do not deny that I have wronged investors and shareholders and caused them losses but I didn’t take a cent for myself,” Wang said then. “That is why I called the special board meeting in March and I volunteered a report on the situation. I take responsibility and will do my best to make up for their losses.”

The company was delisted in May 2011. Wang’s name remains on SGX’s Directors’ and Executive Officers’ Watchlist, a public list of individuals “who have been reprimanded by SGX or who in the exchange’s opinion did not extend the necessary cooperation to the exchange.” Those on the list cannot be given new appointments in Singapore-listed entities before SGX’s “views and guidance” are sought.

Shoemaker China Hongxing kicks shareholders in the face

Sports shoemaker China Hongxing, which was listed in 2005, played well into the consumption story of China’s increasingly affluent middle class, attracting even Western fund houses to take up substantial positions.

However, as the years went by, investors began to lose patience with the inaction of the company on its cash position, which as at Sept 2009, purportedly stood at nearly RMB 3 billion, equivalent to 30% of the company’s then market value of $462 million. It did not undertake buybacks and distributed only a pittance of an interim dividend of one RMB cent per share, which works out to RMB28 million in total.

Evidently, the issue over the idle cash pile had been gnawing at the investment community for months. In April 2009, when the cash pile was already at RMB1.9 billion, The Edge Singapore posed the same question to then CEO Wu Rongzhao. “I think it is necessary to keep large cash reserves so that the company can deal with any economic situation,” says Wu.

In The Edge Singapore (Issue 411, March 8, 2010), Wu had seemingly decided to do something to address the issue. He announced plans to spend RMB1.1 billion to expand its distribution channels and to ramp up its apparels business — adjacent to its core footwear business.

An unnamed analyst told The Edge Singapore then that this RMB1.1 billion coincided with the jump in the company’s reported cash holdings a year ago in early 2009 when questions over the cash pile were raised. “It’s a little bit suspicious,” says the analyst.

Within a year, in February 2011, the company disclosed that EY, its newly-appointed auditor, had discovered discrepancies in the accounts of its subsidiaries.

For seven years, minority shareholders were left in a lurch. In September 2017, the family of former CEO Wu offered to acquire China Hongxing’s operating assets for RMB100 million. The assets were carried in the company’s books at RMB470.7 million. The bulk of the RMB100 million offer consisted of a waiver of debt owed to the Wu family. The actual cash to be given to other shareholders was just RMB28 million. This means a minority investor holding 1,000 shares in China Hongxing will get a grand total of $2.99 in cash.

The hapless trio of independent directors left to hold the fort for the past seven years had the thankless task of fronting a special general meeting held on March 28, 2018, to seek approval from upset shareholders.

They pointed out that if shareholders accepted the offer, they could still find a new business to inject into the empty shell. “Take whatever small money you have, treat it as a dividend. Your shares are still intact,” says Charles Chan Wai Meng. The proposal was approved narrowly.

Chan spoke too soon. Throughout 2019, China Hongxing tried to RTO with a gold miner but the deal fell through. The stock was finally delisted in October 2020.

The Edge Publishing Pte Ltd

IREIT seems to be pretty aggressive in acquisition recently

wow you have been posting alot in here.
Any thoughts on SREITS currently?
oversaturated or plenty of room for growth?

When is the target completion date for this acquisition, bro ?

The Total Acquisition Cost is proposed to be funded by a combination of debt financing, Acquisition Fee Units and the net proceeds raised from the issuance of perpetual securities.
The Manager may also consider funding the Proposed Acquisition by a combination of debt financing, Acquisition Fee units, net proceeds raised from the issuance of the Perpetual
Securities and new equity.

The final decision regarding the method of financing the Proposed Acquisition will be made by the Manager at the appropriate time, taking into account the prevailing market conditions.
Once the final decision has been made, the Manager will announce any update to the pro forma financial effects of the Proposed Acquisition, if applicable.

i hope its not some crooked news!