SINGAPORE (July 19): Lim & Tan Securities says minority shareholders of Wheelock Properties should deserve a higher offer somewhere closer to its last reported NAV of $2.68/share.

While Lim & Tan does not dispute Wheelock parent’s $2.10 offer price is attractive compared to its historical trading prices, the property group has a large cash holdings and large base of recurring income streams as well as its long track record of attractive dividend payments.

Controlling shareholder of Wheelock Properties launches $2.10 per share offer

“We thus recommend to “hold” tight to your Wheelock shares,” says Lim & Tan in a report after the offer was announced.

In addition, offeror Star Attraction, who owns 76.21% of Wheelock, did not say this is their final offer price and that they are unwilling to increase their offer price.

The research house also expects Wheelock’s net cash position to hit over $1.0 billion by the end of this year from $0.92 billion currently.

Wheelock’s remaining development in Singapore, namely Scotts Sq Residences, is only left with 10% of the total 338 units and is currently earning recurring earnings as it is leased out.

As for the other local projects, they have been completely sold out, allowing Wheelock to sidestep the latest new cooling measures.

In China, Wheelock’s Hangzhou project is 98% sold for phase 2 and the final phase, which is also expected to see good demand, is ready for launch.

Investment properties Scotts Sq Retail and Wheelock Place, both near to fully leased, generate yearly rental income of about to $40-50 million annually and are valued at $1.1 billion in total.

At the offer price of $2.10/share, price to book is only 0.78 times and yield is 2.85%.

In 2010, Star Attraction had privatised its HK subsidiary at 1 times book.

Finally, Lim & Tan notes that with Wheelock’s net cash position of $0.92 billion, even if Star Attraction were to offer book value of $2.68/share, they would only have to pay about $0.77 billion, leaving them with $150 million in net cash left over in the company, $1.1 billion worth of investment assets that generates strong free cash flows, 23% stake in Hotel Properties, free development assets in China and also 30 over units of Scotts Sq Residences.

As at 4.13pm, shares in Wheelock are trading 44 cents higher at $2.18.