Sinjia Land's S$2b RTO price tag may be revised with new valuation report

CATALIST-LISTED backpacker hostel operator Sinjia Land's reverse takeover (RTO) by sorghum producer Binex Singapore may not be based on the price tag of S$2 billion that had been previously announced, the board told the bourse regulator last Saturday (Feb 5).

Instead, Sinjia Land said that it has appointed EY Corporate Advisors as an independent qualified valuer whose upcoming valuation report will take precedence over a preliminary report that earlier calculated the valuation of Binex to be between US$2.5 billion and US$3.1 billion.

Singapore Exchange Regulation (SGX RegCo) had queried Sinjia Land over plans to buy the target company for 80 per cent of Binex’s valuation, on the condition that the deal consideration is at least S$2 billion.

Under the RTO deal, which was announced in a bourse filing on Jan 31, Sinjia Land would pay up by issuing new shares at S$0.35 apiece to Binex's owners.

Noting that Binex was set up only on Sept 9, 2021; has not recorded any revenue; and reported a net asset value of around S$900,000 as at end-2021, SGX RegCo asked for details on the factors considered by the board over a deal with such a premium over the net asset value.

Sinjia Land replied in its latest filing that the board considered the deal to be in the best interest of the company and its shareholders, "due to the consideration being negotiated at a significant discount to its fair value based on the valuation conducted by an independent valuer".

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The fresh valuation by EY is estimated to take about 12 weeks to complete. It will cover the commercial and business viability, industry competitiveness, and cost-effectiveness of Binex's business, and will also evaluate the earnings assumptions given by the target, said the board.

Sinjia Land added that the company will engage "relevant professionals" to carry out financial, legal, operational and any other due diligence on Binex and its businesses.

As the deal would also entitle Binex to issue third-party investors loans that can be exchanged for shares in the company, SGX RegCo asked for the implications should the RTO fall through.

"The exchangeable loans will not be converted into shares in the company should the RTO not be completed, and this will have no bearing on the company," said Sinjia Land's board.

In response to other queries from the bourse watchdog, the board disclosed that Binex's first sorghum production project is expected to start generating revenue "in late 2022 or early 2023".

It added Sinjia Land may consider divesting its backpacker hostel operations after the RTO, "to concentrate on the new core business", which will be run by Binex's management.

The board also said Sinjia Land was introduced to the deal vendors through Atsushi Matusda, chief financial officer of battery technology developer and Binex shareholder 3DOM.

Sinjia Land shares last closed last Friday at S$0.102, up by 0.1 Singapore cent or 0.99 per cent, before the latest reply to the SGX RegCo queries.