Superbowl Holdings Ltd - Will Hiap Hoe succeed in taking it private?

11/11/2013 – Hiap Hoe Limited has reopened a S$40 mln note issue, ahead of a takeover of SGX-listed Superbowl Holdings.

The unrated 4.75% Fixed Rate Notes due 5 September 2016 are being marketed to sophisticated investors.

It follows a pre-conditional offer by Hiap Hoe Strategic on October 7 for all Superbowl's issued and paid-up ordinary shares.

The offer price is S$0.75 cash per share.

Superbowl's share price was S$0.735 as at November 8, a price which has been maintained since October 8, 2013.

Its net asset value stated in its third quarter results release is S$0.353, as at September 30, 2013.

Hiap Hoe Strategic Pte Ltd is a private investment holding company and a wholly-owned subsidiary of real estate group, Hiap Hoe Limited, and owns 71.53% of Superbowl.

Out of this 71.53%, the top three shareholders in the concert party group are Hiap Hoe Holdings with 69.74%, Mr Teo Ho Beng with 0.93% and Mr Teo Ho Kang Roland with 0.31%.

Mr Teo Ho Beng is executive chairman and CEO of Superbowl Holdings and has been CEO of Hiap Hoe Group since January 2006.

Mr Teo Ho Kang Roland is Managing Director of Superbowl since March 2012, and is director of the Hiap Hoe Group and Hiap Hoe Limited since 1999.

The following Handshakes map shows the associations of the Teos, Hiap Hoe and Superbowl:

While persons in the concert party group comprising the 71.53% shareholding have been contacted and agree not to trade their shares during the offer period, one of this group, Mr Teo Ho Yeo, has been out of communication right up to the announcement of this pre-conditional offer.

Question

1. Will Hiap Hoe succeed in taking Superbowl private?

If they are, Superbowl Holdings will be a wholly-owned subsidiary of the Hiap Hoe Group, a move which stated in the Offer, is expected to consolidate presence in the property development and investment market for greater control and deployment of resources.

Though the offer states that there is no intention to change management or re-deploy assets of Superbowl Holdings, Hiap Hoe has the right still to do any of these adjustments at will.

This offer expires on January 6, 2014.

Superbowl Holdings said in its third quarter results outlook that it expects a steady contribution from its property business thanks to healthy occupancy, but cautions that economic growth rates are volatile and labour costs are rising.

Its Zhongshan Park development comprising Days Hotel, Ramada Singapore at Zhongshan Park, Zhongshan Mall and Hiap Hoe Building, has been operating since May and is slated to be opened in the fourth quarter.

Also, its new bowling centre at the HomeTeam NS-JOM Clubhouse on Ah Hood Road has been operating since October.

It didn't quantify what the impact would be on profitability in the current or next financial year.

These are the company's Q3FY13 results published on November 4:

Revenue: +8% to S$4.6 mln
Profit: -61.3% to S$1.1 mln
One-off gains/losses: (S$296,000) vs S$925,000
Cash flow from operations: S$624,000 vs S$1.2 mln
Cash reserves: S$1.2 mln vs S$842,000
Dividend: None

Revenue climbed 8% on the back of higher revenue from the bowling and property rental businesses.

Bowling revenue grew to S$1.89 mln from S$1.61 mln in the previous quarter, as the Group's new Bowling Centre at SAFRA Toa Payoh continues to contribute positively since its opening in October 2012.

Property rental revenue grew to S$2 mln because a majority of the Group's properties increased their rental rates with successful renewals.

Other operating income also rose 11% because of higher dividend income and interest income from an associate and joint ventures.

(Total:3 questions)

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