AF Global Limited: Proposed Acquisition by Aspial Corporation Limited — Detailed Investor Report

Key Points of the Report

• Proposed Acquisition: Aspial Corporation Limited (“Aspial”), together with KWMCo, proposes to acquire all the issued ordinary shares in AF Global Limited (“AFGL”), except for shares already held by Aspial and Mr Koh Wee Meng (“KWM”), via a Scheme of Arrangement.
• Scheme Consideration: Offer price of S\$0.11 per Scheme Share in cash, totaling approximately S\$31.76 million for 288,682,679 shares (27.35% of issued shares).
• Ownership Structure: Offeror (AFG Investment Pte. Ltd.) is equally owned by Aspial and KWMCo. Both have equal board representation and joint decision-making rights.
• Interested Person Transaction: KWM and KWMCo are “interested persons” due to family and shareholding relationships, with Aspial providing a guarantee for 50% of the financing (up to S\$15.88 million).
• Delisting: Upon completion, AFGL will be delisted from the SGX-ST, and become wholly owned by the Offeror.
• Financial Assessment: The Scheme offers a premium over recent share prices but a discount to Net Asset Value (NAV) and Revalued Net Asset Value (RNAV).
• Liquidity: Shares have traded thinly, with low daily volumes and few trading days, making cash exit attractive for minority shareholders.
• No Competing Offers: No alternative or competing offer exists, and the likelihood of such an offer is remote due to the Offeror’s dominant shareholding.
• Cost Savings: Delisting will reduce compliance costs and allow AFGL to focus resources on business operations.

Important Shareholder Information & Price-Sensitive Aspects

1. Offer Premium and NAV Discount

The S\$0.11 Scheme Consideration represents:

• Premiums of 30–46% over 1–12 month VWAPs.
• A discount of approximately 22.9% to the latest NAV per share (S\$0.1426) and 19.9% to RNAV per share (S\$0.1374).
• Implied Price-to-NAV ratio of 0.77x and Price-to-RNAV of 0.80x, both above peers in the sector.

Potential Price Impact: The premium may provide a near-term uplift for shareholders, but the NAV discount could be seen as undervaluing long-term asset value.

2. Delisting and Exit Opportunity

The Scheme will result in AFGL’s delisting from SGX-ST. Minority shareholders will receive cash for their shares, providing a liquidity event in an otherwise illiquid stock. The Offeror and concert parties already control 72.7% of shares, making other offers unlikely.
Price Sensitivity: This represents a definitive opportunity for shareholders to exit at a premium, but also the last chance to participate in future gains if the company’s assets appreciate post-delisting.

3. Financial Performance and Outlook

Price Sensitivity: The Group’s performance is volatile, with recent improvement but significant exposure to asset sales and currency risks. Investors should weigh the potential for future recovery against the certainty of a cash exit.

4. Asset Revaluation

• Key assets: Holiday Inn Resort Phuket (HIRP), Cityview Apartments (Vietnam), Somerset Vientiane (Laos), Knight Frank Pte Ltd (KFPL), and Xuzhou JV.
• Recent revaluations show a net deficit of S\$5.54 million, mainly due to uncompleted sale in Xuzhou.
• RNAV adjusted to S\$145 million (S\$0.1374/share).

Price Sensitivity: If asset values recover post-sale or if Xuzhou JV is successfully auctioned, NAV may be understated, suggesting the offer may undervalue the company.

5. Comparable Company and Deal Analysis

• Scheme Consideration P/NAV and P/RNAV ratios (0.77x and 0.80x) are above those of comparable SGX-listed hotel and property companies.
• Premium to VWAP is in line with, but lower than, recent successful privatisation deals.
• EV/EBITDA ratio implied by the deal (21.23x) is above peer median and mean.

Price Sensitivity: The offer is attractive compared to sector peers, but less so against recent privatisation premiums.

6. Risks and Uncertainties

• AFGL’s business is exposed to tourism recovery, competition, currency fluctuations, and China property market risks.
• No evidence of alternative or competing offers — shareholders face limited options other than acceptance.
• Delisting means loss of access to future equity market funding and liquidity for minority holders.
• Scheme binding on all shareholders if approved, waiving rights to future general offers.

Conclusion & Investment Implications

The proposed acquisition of AFGL via Scheme of Arrangement offers a substantial premium over recent trading prices, but at a discount to NAV and RNAV, implying the offer may undervalue the company’s long-term asset base. For minority shareholders, the offer presents a rare cash exit opportunity given the illiquid trading history and lack of alternative bids. On completion, AFGL will be delisted, and shareholders will forgo further participation in any upside from asset recoveries or operational improvements.

Potential Share Price Impact: The announcement is price-sensitive, likely to move AFGL’s share price toward the offer level of S\$0.11. Investors should monitor any updates on asset sales, competing bids, or regulatory approvals which could materially affect the final outcome.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should conduct their own research and seek appropriate professional advice before making investment decisions. The analysis is based on publicly available information as at the date of the report and is subject to change without notice.

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