Published July 14, 2009

CK Tang is undervalued, claim some shareholders

Some 10 investors sign petition to SGX and MOF after meeting SIAS chief

By JAMIE LEE

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A GROUP of shareholders of CK Tang - which the Tang family plans to take private - claim the flagship store has been undervalued because the company has not taken redevelopment potential into account.

Key meeting: CK Tang will hold an EGM on Friday to determine whether the Tang family will finally take the company private at its third try

This led some 10 minority investors to sign a petition to the Singapore Exchange and the Ministry of Finance after meeting the Securities Investors Association (Singapore), or SIAS, yesterday.

In the petition, they express unhappiness that independent directors requested the property be valued based on its 'existing use'.

'We are questioning the basis of the valuation,' said shareholder Alan Goei, who bought most of his shares about two years ago when he assumed the high bid price for Ion Orchard could mean a higher valuation for CK Tang.

A letter from the independent financial adviser PricewaterhouseCoopers showed the property was valued at $340 million at May 25 this year. This is much lower than other Orchard Road sites such as Wheelock Place, an office and retail property valued at $790 million at Dec 31, 2008.

A market watcher told BT the value of a property can be affected by rental income, tenure, potential to be hived off into a real estate investment trust and redevelopment potential.

He said CK Tang's management has been 'passive' in making greater use of the department store's floor area and there have been no moves to lease space to external tenants or stray from the department store concept.

CK Tang's majority shareholders - Tang Wee Sung and Tang Wee Kit - said in a circular to shareholders that they have 'no intention' of discontinuing the retail business, disposing of or redeveloping the department store.

Because they have no intention of changing the business concept, the property can continue to be valued based on 'existing use', the market watcher said.

But shareholders have questioned whether the company is holding back redevelopment plans until after its de-listing, leading them to ask for an offer that at least matches CK Tang's net tangible assets of 93 cents per share at March 31, 2009 - 10 cents higher than the offer price of 83 cents.

'When there is suspicion that the company has ambitions to redevelop, the company should make it clear if that is not the case,' SIAS president David Gerald told BT.

He said the offer price 'fell short of shareholders' expectations' and urged shareholders to reject it if they feel it is unfair.

CK Tang will hold an extraordinary general meeting on Friday to determine whether the Tang family will finally take the company private at its third try.

BT understands that as at last Friday, the Tang brothers held 89.33 per cent of the company.

They need to own 90 per cent of the company to de-list it, or have less than 10 per cent of shareholders vote against the offer on Friday.