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Soilbuild Launches Preferential Offering to fund Bukit Batok Connection Acquisition

Soilbuild REIT Logo

Soilbuild Business REIT has announced the launch of preferential offering to partially fund the acquisition of Bukit Batok Connection.

The preferential offering will issue up to 94,353,672 new units in Soilbuild REIT to raise S$59.4 million dollars. New units will be issues on the basis of 1 new unit for every 10 existing units. The new units will be issued at a price of S$0.63 per unit.

What is Preferential Offering?

A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital.

Increase in Average Leverage

Before the preferential offering, the average leverage of Soilbuild REIT is 35.9% as mentioned in my previous post. If Soilbuild REIT manages to get the maximum proceeds of S$59.4 million, the average leverage will increase to 36%.

Dilution of Share Price

With the issuance of new units, we are all worried that the share price will be diluted.

As of 29th July 2016, a total of 943, 536, 726 units are issued, market closing price is S$0.67.

943,536,726 x $S0.67 = S$632,169,606

Assuming maximum proceeds,

94,353,672 x $0.63 = S$59,442,813.40

Estimated stock price after dilution

(S$632,169,606 + S$59,442,813.40) divide by (943,536,726 + 94,353,672)

Thus, the estimated stock price after dilution is $0.6664.

Can we conclude not much dilution after the new units are issued at preferential price?

Should you or I take up the Offer?

Based on the closing of S$0.68 on 18th August 2016. The issuance price of S$0.63 translate to a discount of 7.35%. With slight dilution in stock price and a decent discount of 7.35%, it is a pretty good offer. However, one should still consider the risks involved (Should You Buy Soilbuild REIT Now?) prior to making your own personal decision.

8 thoughts to “Soilbuild Launches Preferential Offering to fund Bukit Batok Connection Acquisition”

  1. The positive here is that the purchase is accretive and will directly provide DPU to the investors. The negative here is the gap that will be vacated by Technics which will be ending in 2017. If the management can find a replacement, you can definitely see the biggest risk of DPU drop being covered. If you have vested, it’s good to take up the PO. If you have not, wait and see after the dust has settled. There is still plenty of time since it’s now traded below IPO prices and many people are still looking to the price going up further than the IPO prices.

  2. is peferential shares avail to retail investors who hold existing shares?
    is it the same way as recent croesus scrip application via ATM?
    ie, need to wait for letter, get allocation, choose excess, etc etc

  3. To JQ, it’s not preferential shares. It’s preferential offering. The usual applies, wait for letter, go to ATM to subscribe.

    To sweet retirement, I’ll likely apply for excess as well.

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