GuocoLand’s rationale for privatising its Malaysian arm not strong

[SINGAPORE] On Tuesday (Feb 3) night, GuocoLand announced that it planned to take its Malaysia-listed unit private at an offer price of RM1.10 a share, for the almost-35 per cent stake it does not already own.

For minority shareholders of Bursa-listed GuocoLand (Malaysia) or GLM, the rationale to accept the proposal by GuocoLand’s wholly owned subsidiary GLL (Malaysia) to take it private is sound.

Trading liquidity of GLM shares is low. Minority shareholders of GLM get to realise their holdings at a premium of 17.7 per cent to the last-traded price on Jan 30, and 47.7 per cent to the six-month volume weighted average market price up to Jan 30.

Moreover, keeping GLM listed may not make sense, as it has not raised equity from the capital market in over 10 years, and resources are being incurred to maintain the listing status.

GuocoLand, which owns about 65 per cent of GLM shares, could be snaring a good deal as its offer price of RM1.10 a share represents a 47 per cent discount to GLM’s net asset value (NAV) per share of RM2.08 as at end-2025.

Also, the proposed privatisation of GLM is by way of a selective capital reduction, which will enable capital repayment of RM269.4 million or around S$86.9 million to entitled shareholders of GLM.

Focusing on Singapore

However, does it make sense for GuocoLand to raise its stake in GLM when a better path forward for the Singapore-listed group could arguably involve divesting its overseas businesses?

GLM’s profits are not substantial. For the half-year ended Dec 31, 2025, it posted a net profit of RM12.8 million. For the financial year ended Jun 30, 2025, its net profit was RM18.8 million.

For perspective, GuocoLand reported a net profit of S$85.4 million for the half-year ended Dec 31, 2025. For this six-month period, profit after tax from the group’s Singapore segment was S$129.5 million, compared with S$5.9 million from Malaysia and a loss of S$27 million from China.

GLM has been under GuocoLand’s ownership for some time. If GLM cannot be scaled up to meaningfully contribute to GuocoLand, perhaps the Singapore-listed group is better off divesting the Malaysian business. 

After all, having geographic diversification can hurt productivity when overseeing the affairs of overseas businesses that make insignificant contributions would invariably consume the time and energy of GuocoLand’s Singapore-based top management.

Indeed, interest in the shares of GuocoLand – which has an excellent track record in building condos and integrated developments in Singapore – could strengthen if it were to focus on Singapore only, given that many investors are positive on the city-state’s private residential and commercial property.

By steering away from overseas ventures, GuocoLand could do even more in the Singapore market, where ticket sizes per property development project are often large.

Alternative moves

As for GLM, one way to drive better performance, thus benefiting its shareholders, would be to merge with or be acquired by a stronger Malaysian property group, such as Eco World Development Group, IOI Properties Group, Sime Darby Property or S P Setia, or a conglomerate like Sunway.

Alternatively, GuocoLand’s chairman and substantial shareholder, Malaysian billionaire Quek Leng Chan, could privatise GLM using a private vehicle.

Amid a revival of interest in the Singapore equities market and resilience in various segments of the property market here, GuocoLand’s share price has rallied in recent months. Still, the group trades at a huge discount to its end-2025 NAV per share of S$3.93.

Instead of looking to raise its stake in GLM, what GuocoLand’s board of directors should prioritise is unlocking value with its prized Singapore assets.

For example, consider launching a listed real estate investment trust that owns the office and retail components of Guoco Tower in Tanjong Pagar and Guoco Midtown in Beach Road.

Also, GuocoLand could try to grow in managing third-party assets by using Guoco Tower and Guoco Midtown to seed a private fund. 

For reference, Hongkong Land has just launched the Singapore Central Private Real Estate Fund, with an initial portfolio that includes its interests in Marina Bay Financial Centre Towers 1 and 2, Marina Bay Link Mall, One Raffles Quay and One Raffles Link, as well as Qatar Investment Authority’s Asia Square Tower 1.

GuocoLand’s free float is small. Its latest annual report noted that 19 per cent of its shares are held by the public; Quek’s deemed interest in the group was 71.9 per cent.

GLM’s board of directors has until Mar 2 to determine if it agrees to implement GuocoLand’s proposed privatisation and table it for consideration by GLM’s entitled shareholders. In short, the fate of GuocoLand’s proposed privatisation could be in the hands of GLM’s minority shareholders.

GuocoLand’s minority shareholders probably have little to celebrate if the group succeeds in privatising GLM.

Instead, what tidying up GuocoLand’s holding in a Bursa-listed subsidiary could do is make a potential privatisation of GuocoLand easier to execute.

This could be done by Quek-linked Hong Kong-listed investment company Guoco Group or other vehicles linked to Quek.

There are numerous precedents of asset-heavy Singapore-listed property groups being successfully privatised, and Quek is a seasoned corporate dealmaker.

While efforts are being made to increase investor interest in Singapore stocks, perhaps GuocoLand may exit the Singapore Exchange in the not-too-distant future. 

The writer holds shares in GuocoLand