Brokers' take: Lim & Tan says 'reasonable' for GL shareholders to accept S$0.80 final offer

LIM & Tan Securities on Tuesday said it was "reasonable" for GL shareholders to accept Guoco Group's final offer price of S$0.80 per share, even though the revised price was nearly a third lower than the brokerage's initial fair value estimate of S$1.16.

The final offer price of S$0.80 reflects a price-to-book ratio of 0.84 time, in line with the valuations for other delisted property players such as United Engineers and Wheelock Properties. UE and Wheelock were delisted from the Singapore Exchange in 2020 and 2018, respectively.

Lim & Tan also noted that Guoco Group is paying minority shareholders a level that coincides with GL's January to February 2020 trading price levels before the Covid-19 situation became a global pandemic that devastated hotel operators globally.

"The S$0.80 level that minority shareholders are getting now is as if Covid-19 did not happen," the research team said. In reality, most of GL's UK hotels are operating at low utilisation levels as the emergence of new Covid-19 strains makes reopening UK's hospitality industry still a distant possibility, Lim & Tan added.

Moreover, with the proposed privatisation offer now declared unconditional, assuming offeror GuocoLeisure garners close to the 90 per cent level of acceptances, minority shareholders who have not accepted the offer risk holding onto an "illiquid stock".

They may also potentially see the stock price fall back to pre-offer price levels of S$0.50 to S$0.60. Thus, Lim & Tan advises minority shareholders to accept the revised final offer from Guoco Group.

As at 1.14pm on Tuesday, shares of mainboard-listed hotel operator GL were trading flat at S$0.80.