Don't chase SC Global shares beyond $2.00: L&T

Don’t chase SC Global (D2S.SG) beyond $2.00 or be in a hurry to accept the $1.80/share bid from its CEO Simon Cheong, says Lim & Tan Securities.

It notes the stock surged last week after major shareholder Wheelock Properties (M35.SG) acquired just over a million shares at $1.81/share, with Wheelock saying the stock was trading at a 40%-50% RNAV discount.

If Wheelock continues buying SC Global shares, it would further reduce the around 21% free float, while Cheong is unable to pick up more shares to increase his already more than 60% stake unless he raises his offer, L&T notes.

“It is fair to say foiling Simon Cheong’s current plan (he chose voluntary unconditional takeover, instead of voluntary delisting) would be lose-lose to all parties involved: i.e. SC Global will suffer the penalty for the many unsold luxury homes, thereby affecting the ability to pay a dividend,” it says, noting the stock would also become even more illiquid.

The stock is up 4.8% at $2.07.