[SINGAPORE] Sinarmas Land defended the valuation methods used by the independent financial adviser (IFA) in the offer by Lyon Investments for shares in the company, in its response to queries by Singapore Exchange Regulation (SGX RegCo) on Tuesday (May 13).
The company, after consulting the adviser W Capital Markets, said that the IFA had deemed the holding company discount applied to its unlisted assets to be within “a reasonable range to adopt”.
In its assessment of Lyon Investments’ initial offer price of S$0.31 a share, W Capital Markets had noted that the offer was not fair but reasonable, based on its valuation of S$0.35 to S$0.361 per share. This valuation had applied a 20 to 22 per cent holding company discount to the company’s unlisted assets.
The market regulator on May 9 posed queries to the company on the IFA’s decision to apply the holding company discount. While the regulator said that it had noted the adviser’s rationale, it remained unclear how the figure of 20 to 22 per cent had been derived.
In its response, Sinarmas Land said that the IFA’s application of the discount was based on past cases of 11 SGX-listed mid to large-cap conglomerates, including other holding companies in the property sector.
Comparing their closing share prices to target prices by research analysts based on sum-of-the-parts (SOTP) analysis, the IFA found that a median discount of 24 per cent and mean of 19.5 per cent were observed. When applied to conglomerates in the property sector, these figures were 24.1 per cent and 24 per cent, respectively. The IFA had therefore deemed the range of 20 to 22 per cent reasonable, Sinarmas Land said.
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The IFA had previously explained that holding company discounts are commonly applied to reflect the market perception of risks involved in owning a holding company. Corporate expenses, tax implications from dividends and investors’ limited control over subsidiaries could also be the basis for such discounts, the IFA had said in response to criticisms.
This claim was questioned by the regulator, who requested that the adviser provide examples to show that the application of such discounts by IFAs is a “commonly accepted practice”.
In response, the IFA noted that SOTP analyses in the voluntary delisting of Golden Energy and Resources in May 2023, and a scheme of arrangement of Japfa in March 2025 had both applied similar discounts, ranging from 10 to 25 per cent in the former, and 20 to 23 per cent in the latter.
W Capital Markets also pointed to IFA statements in deals involving WBL Corporation, Keppel Telecommunications & Transportation and Singapore Press Holdings, all of which highlighted a sound basis for applying SOTP discounts to conglomerates.
On Saturday, Sinarmas Land announced that the offeror had raised the offer price to S$0.375 a share. The revised offer price represents an increase of 21 per cent or S$0.065 over the initial offer price, and is higher than the highest closing price of the company’s shares for more than six years.
Shares of Sinarmas Land were trading 1.3 per cent or S$0.005 lower at S$0.375 as at 10.47 am on Wednesday.
