Investment Analysts Warn Revised S$1.19 Offer Fails to Reflect Suntec REIT’s True Value
Unitholders of Suntec Real Estate Investment Trust (REIT) are being advised by investment research firm Morningstar to reject the latest cash offer of S$1.19 per unit from property magnate Gordon Tang and his wife Celine, made through their investment company, Aelios. According to Morningstar, the offer undervalues the REIT and fails to align with its fair-value estimate of S$1.38 per unit.
A Modest Increase, but Still Below Fair Value
The revised offer represents a 2.6% increase over the initial offer of S$1.16 per unit, made on Dec 5, 2024. While this adjustment complies with the Singapore Code on Takeovers and Mergers, it remains significantly lower than Morningstar’s valuation.
In a note on Jan 9, 2025, Morningstar equity analyst Xavier Lee stated, “The revised offer still does not reflect the REIT’s intrinsic value. Investors are better off selling their units on the open market, where prices are higher.”
The Singapore Code on Takeovers and Mergers mandates that any offeror must match or exceed the price paid for units purchased in the open market during the offer period and the six months prior. Aelios acquired 18 million units at S$1.19 per unit through an open-market transaction on Jan 8, prompting the revision.
Market Prices Exceed Offer Value
Following the announcement, Suntec REIT’s unit price rallied above the revised offer. Units traded at S$1.22 as of 10:36 AM on Friday, providing investors an opportunity to secure better value than accepting the S$1.19 offer.
Morningstar remains skeptical of Aelios’ intentions to take Suntec REIT private. “We believe this offer is primarily to comply with regulatory obligations rather than a genuine move to privatize the REIT,” Lee added.
Background of the Takeover Offer
Aelios’ offer was triggered when its deemed interest in Suntec REIT surpassed 30%, following the purchase of 62.5 million units at S$1.16 per unit on Dec 5. Under Rule 14.1 of the Takeover Code, any entity that gains control of more than 30% of a REIT must extend a mandatory general offer to acquire all remaining units.
As of Jan 8, Aelios and its concert parties controlled approximately 973.4 million units, or about 33% of Suntec REIT’s issued units. To succeed, the offer must achieve control of at least 50% of the REIT’s total issued units.
Industry Experts Voice Concerns
The S$1.19 per unit offer has been met with criticism from other financial analysts as well. RHB Research previously recommended rejecting the initial S$1.16 offer, noting that it reflected a 44% discount to Suntec REIT’s net asset value (NAV) of S$2.07 per unit. Analysts maintain that the latest offer similarly undervalues the REIT.
Future of Suntec REIT
Despite the mandatory offer, Aelios has expressed intentions to maintain the REIT’s listing on the Singapore Exchange (SGX) even after the offer closes. The offer deadline has been extended to 5:30 PM on Feb 3, 2025.
What Lies Ahead for Unitholders?
Unitholders face a critical decision as the deadline looms. With Suntec REIT’s market price exceeding the offer value and expert recommendations favoring rejection, the consensus is clear: unitholders are urged to wait for fairer valuation or explore open-market opportunities.
For now, the spotlight remains on whether Aelios will secure sufficient backing to make its bid successful. With the ongoing rally in unit prices, unitholders are in a strong position to demand more.
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