The Securities Investors Association (Singapore), or SIAS, "strongly disagrees" with the advice given by W Capital Markets, the independent financial adviser appointed to weigh in on the privatisation deal of Sinarmas Land.

The retail investors' association says the recommendation by the company's independent directors to minority shareholders to accept the 31 cents per share offer from the controlling Widjaja family is "exploitative".

"Many shareholders have expressed unhappiness on the recent voluntary unconditional cash offer made for Sinarmas Land, which is widely seen to be 'lowball' and therefore exploitative. SIAS shares their view," says David Gerald, founder, president and CEO of SIAS on May 5.

"Instead, SIAS calls upon the offeror to make a revised offer that is fair, reasonable and closer to the net asset value per share of 85.1 cents," he says.

Gerald notes that W Capital Markets has, in its April 25 opinion as the IFA, deemed the offer as "not fair but reasonable''.

Second, SIAS notes that as at Dec 31, 2024, the net asset value (NAV) per share of Sinarmas Land was about 85 cents, which means that the offer is pitched at a significant 63.6% discount to NAV.

Third, the IFA's opinion that the offer is "not fair'' is based on, among others, its assessment of fair value of 35 cents to 36.1 cents per share which takes into account the market value of Sinarmas's stakes in listed subsidiaries PT Bumi Serpong Damai Tbk (BSDE), PT Duradelta Lestari TBK (DMAS) and its remaining unlisted assets.

However, Gerald points out that the IFA assumed a "holding company discount'' of 20%-22% when arriving at the above figures, an assumption which can be questioned.

What is "particularly concerning" in the IFA report, says Gerald, is that Sinarmas Land's remaining assets, carried at $972.5 million on the balance sheet and revalued to $1.2 billion, were valued at only $757.9 million in the sum-of-the-parts (SOTP) analysis done by the IFA.

Gerald points out that the IFA applied a discount of 37% to the revalued NAV of these assets before applying a further holding company discount.

"In our judicial system, appeal mechanisms are a fundamental safeguard-yet in the takeover process, there appears to be no recourse for minority shareholders to challenge the IFA's conclusions, no matter how debatable," says Gerald, a former magistrate.

"We contend that the unlisted assets have effectively been double-discounted in the SOTP analysis. Removing the discounts could increase the fair value by as much as 10.5 cents per share," he adds.

Gerald flags that the free float of Sinarmas Land has already dropped below 10%, which may result in automatic trading suspension.

When this happens, minority shareholders will be at a greater disadvantage, as they now need to decide whether to accept the existing offer of 31 cents per share, or hold on to their shares for an extended period once trading suspension takes place and hope for a revised offer.

"The offeror has stated that it does not intend to preserve the listing status of the company and does not intend to support or take any step to restore its free float. If the offeror is entitled to exercise its rights to compulsory acquisition under Section 215(1) of the Companies Act, it will do so," says Gerald.

"Should shareholders decide that waiting is their preferred option, they need to have sufficient holding power and understand that there is no assurance that any future exit offer will exceed the current one," he warns.