Sunday 13 December 2015

Carson’s prefer delisting to diluting Equity One stake

Equity One PLC, the property development company of Carson Cumberbatch PLC which recently took a decision to de-list from the Colombo Stock Exchange due to its dominant shareholder (Carson’s) not willing to shed part of its holdings to be compliant with the CSE’s minimum public float rule, has reported a stand-alone revenue of Rs. 51.2 million in the half year ended September 30, 2015, up 7.6% from a year earlier.

The shareholders of Equity One recently agreed to the delisting at an extraordinary general meeting with a third largest shareholder of the company, Mr. K.C Vignarajah, vigorously resisting the move.

However, with Carson owning 96.27% of the company, Vignarajah’s 0.3% (123,943 shares), was insufficient to stall the move. Mrs. S. Vignarajah with 25,199 shares (0.006%) is the 12th largest shareholder of the company.

Carsons Management Services (Pvt) Ltd, managers of Equity One, said in the company’s September financials that the Equity One board had announced its decision to de-list on November 2, subjected to shareholder and regulatory approval. The shareholder approval has now been obtained at a recent extraordinary general meeting.

The mangers said that the rationale for the de-listing followed the minimum public float regulations imposed by the SEC which require all companies listed on the main board of the CSE to either have a minimum public float of 25% in the hands of a minimum 750 public shareholders or a market capitalization of Rs. 5 billion of its public holding in the hands of a minimum 500 public shareholders holding 10% of its total ordinary voting shares by December 31, 2016.

"With a public float of only 3.72% as at September 30, 2015, Equity One is currently well below the stipulated minimum public float threshold," the managers said.

They further said that the directors of Equity One had made arrangements with Carson’s for the purchase of shares from minority shareholders who may wish to divest/sell their shares at an offer price of Rs. 77.50 per share which is at a 62% premium to the volume rated average share price between July 1 and October 28, 2015.

"The offer price is based on a premium on a net asset value recommended in the independent valuation report," the managers said.

The September financials said that the half year under review had in addition to higher revenue seen increase in finance income together with a deferred tax gain. This has facilitated a 48.5 % increase to the company’s net profit for the period under review against the first half of the previous financial year.

"The increase in the finance income was driven by higher dividend income received during the period," the managers said. "Accordingly net profit for the six months ended September 30, 2015 stood at Rs. 41.4 million."

At group level, Equity One registered 12.5% revenue growth from a year earlier mainly due to improved occupancy reported by its subsidiary, Equity Two, and overall rent revision of group properties.

Group occupancy for the six months under review stood at an average of 90% against the 88% in the first half of the previous financial year.

On the expenditure side there were increases in administrative and other operational expenses and deferred tax expenditure of Rs. 3.3 million and Rs. 1.5 million respectively over the comparative period a year earlier.

The increase in administrative expenses was attributed to brokerage fees incurred to acquire new tenants and an increase in professional fees.

At group level, the net profit on the back on increased revenue for the six months ended September 30, 2015 was Rs. 55.8 million, up 10.7% from a year earlier.

All shareholders of Equity One other than Carsons, individually owned less than 0.35% of the company’s equity. The estate of the late Mr. M Sri Mahadeva, is the second largest shareholder with 0.34%. 
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