Tuesday 15 May 2018

Property Development shareholders to push for better exit price and dividend

Property Development PLC (PDL), owners of the Bank of Ceylon headquarters building on Echelon Square which is seeking a delisting from the Colombo Stock Exchange, will hold its 38th annual general meeting on May 30 in the backdrop of minority shareholder dissatisfaction of the Bank of Ceylon’s offer to buy their shares at a price of Rs. 123.

The Bank of Ceylon which is the dominant shareholder of PDL with 95.55% of its equity does not wish to sell down its holding which makes it impossible for the company to comply with the requirement of the 20% public float of shares of listed companies required by the Colombo Stock Exchange.

PDL’s directors have determined that given the company’s present financial position, they are of the view that "any capital infusion through a public offering of shares at this stage is not viable or required."

Shareholders have been told that the exit offer price of Rs. 123 per share is at a 44% premium to the Volume Weighted Average Price the share had commanded and a 12% premium to the highest traded price over the three months ending Feb. 8, 2018.

But shareholders voiced dissatisfaction of the exit offer price at an April 4 extraordinary general meeting summoned to seek their approval for the Rs. 123 price and also to change the name of the company to Property Development Ltd. – as it was originally called – following the delisting.

Some argued that the rent charged from the Bank of Ceylon, the only tenant in the building, was unrealistic depressing profits of the company.

In its recently released annual report, PDL said nothing about its plans to delist as well as the exit price offered by BOC to minority shareholders numbering nearly 4,000 of whom the vast majority (2,977) own up to 1,000 shares.

The PDL share closed on the CSE on Friday at Rs. 127.10 – slightly higher that BOC’s exit offer price – for a small quantity of less than 6,000 shares.

PDL which in addition to owning the BOC headquarters building also owns Koladeniya Hydropower (Pvt) Ltd, posted a group profit of Rs. 657.6 million before tax in 2017. The after tax result was Rs. 482.1 million. The company carries over Rs.1.1 billion retained earnings in its books.

The directors have proposed a first and final dividend of Rs. 3.50 per share, down from Rs. 15 per share paid the previous year, for 2017.

Analysts expect shareholders to push at the forthcoming AGM for a better exit price to the minority shareholders together with a higher dividend urging that at least the retained earnings carried in the books of the company should be distributed to shareholders before any delisting.

"Given its holding the BOC will get most of this money. What the minority get will be a pittance but it will be something for many of them," one shareholder said.

All shareholders other than the BOC individually hold less than 0.5% each with the highest owning 0.36%.

The PDL share traded at a low of Rs. 72 and a high of Rs. 115 in 2017 closing at Rs. 97. Earnings per share for the year was Rs. 7/12, up from Rs. 6.30 a year earlier and the net asset value of per share was Rs. 52.69, up from Rs. 46.44 the previous year.

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