SHAH ALAM CHINESE RESERVE LAND-GEELY RECORD SHARE PRICE SUGGESTS PROTON ACQUISITION IS AT DISCOUNT TO VALUE OF MASSIVE PREMIUM LANDBANK
The announcement of an acquisition usually leads to a spike in the share price of the target and drop in the share price of the acquirer. When the reverse happens , it usually means that the market has determined that the target is being acquired at a discount to intrinsic value.
Quite apart from its automobile business, Proton Holdings Bhd has a massive land bank, including that site in Shah Alam which then owner DRB-HICOM had planned to develop as far back as 2013,at an estimated Gross Development Value of RM 4 billion.
DRB-HICOM Bhd plans to redevelop Proton’s manufacturing complex in Shah Alam
into an integrated development that will generate around RM4 billion in gross development value (GDV).
It is no mystery then that the Geely Auto share price is at an all time high, for reasons including the Proton acquisition (see Nikkei article below), Clearly, the market perceives that Geely is acquiring Proton at a discount,and that the automobile business is not necessarily the main component of the company that is to be acquired.
However, Shah Alam is considered Malay-Muslim or Bumiputera territory, where the Malay and Muslim identity is jealously guarded. Land in Shah Alam is in effect Malay reserve.
Geely, like other Chinese companies, is more likely than not to market the development to Chinese buyers exclusively so it does appear that the Proton land in Shah Alam will undergo a transformation into Chinese Reserve land.
Geely Auto shares hit all-time high — again
However, Lau Siu Cheung of Prudential Brokerage expressed caution over whether China’s auto industry can continue to grow, citing the slowing consumer market in the country. Lau also noted that strong rivalries could lead to price competition.