Case Studies

On April 14, 2014, CapitaLand Limited, a Singapore-based real estate company, launched a voluntary conditional cash offer of SG$2.22 for each share (SG$3.06 billion in total) of its subsidiary commercial property development and management company, CapitaMalls Asia Limited (CMA). CMA’s principal business strategy was to invest in, develop, and manage a diversified portfolio of real estate used primarily for retail purposes in Asia. CapitaLand’s offer represented a 22.3 per cent premium over CMA’s closing price of SG$1.815 on April 11, 2014. The intention was to delist CMA and fully integrate it into CapitaLand. As an investor in CMA, you are seeking a reasonable valuation of CMA based on its past financial performance and other relevant market information. You also need to compute the premium, net present value (NPV), and synergy of the acquisition. For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

On March 8, 2017, Singapore-based food outlet operator Kimly Limited (Kimly) announced its intention to go for an initial public offering (IPO). Through this IPO, it aimed to raise SG$43.5 million. Altogether, 173.8 million new shares would be issued at SG$0.25 per share, comprising a retail tranche of 3.8 million shares and a placement tranche of 170 million shares. The chances of successfully getting Kimly’s IPO shares were slim, given the small retail tranche. In addition, the controlling shareholder and other key shareholders were subject to lock-up periods, which would prevent a short-term overhang of the shares. These factors implied that the supply of Kimly’s shares would be scarce in the initial six months after the IPO, which could have a positive impact on the share price. A retail investor, drawn to the issue because of Kimly’s identity as a family firm, applied for the IPO and was also considering purchasing shares in the aftermarket later in March. Was this a worthwhile investment, and if so, what should this investor’s maximum price be? Should such an investor plan to sell immediately or hold for the long term? For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

This exercise places the reader in the position of an investor, who, before 2017, had invested for almost 20 years. Since the financial crisis in 2008–09, this investor had stayed away from the US market. The investor’s return from the previous year stood at a mere 2 per cent. Given that many political events would likely occur in 2017, the investor hoped to revise their investment strategies at the time by developing a more internationalized portfolio. Specifically, the investor was considering how to allocate capital among the existing 10 broker-recommended exchange-traded funds traded on the Singapore stock exchange and two exchange-traded funds in alternative assets traded in the US market. The investor also needed to provide additional cash flows for the education of their two daughters from year two onward for a total of four years. The investor was also willing to reshuffle the investment portfolio to put more weights into the US market. However, before making the revised investment decision, the investor needed to consider the expected returns and risks. For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

Profit-making corporations returned cash to investors through dividends or share repurchases. Market participants referred to the fraction of the profits paid to shareholders in the form of dividends as the "payout ratio." However, a large number of firms have never paid a dividend. For instance, over the past decade, more than half of the listed firms in the United States neither paid a dividend nor repurchased shares. For example, only 20 per cent of firms on the Singapore Stock Exchange consistently paid dividends over the past decade, with similar proportions observed in both US and European stock markets. The percentage of dividend-paying firms plummeted to a record low of 17 per cent in 2000. In fact, most of the "new economy" firms such as Amazon, Facebook, and Google, reinvested their entire savings. This note describes rational dividend theories, behavioural dividend theories, and outlines the four categories of dividend strategies followed by firms. For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

A new analyst has been asked to forecast the upcoming dividends for Singapore Airlines Limited. However, unlike most dividend-paying firms, which typically maintain stable, transparent, and simple dividend policies, Singapore Airlines maintained an opaque, complex, and irregular pattern of dividends. Further, the company did not respond to requests for information about expected dividends or the company's dividend policy. The analyst decided to gather historical data about the company and its competitors to gain insights on Singapore Airlines’ dividend policy and to forecast its upcoming dividend. For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

Under the visionary leadership of Hiroshi Yamauchi, Nintendo Co., Ltd. (Nintendo) of Japan had transformed from a small founder-controlled business to a global and professionalized firm. Yamauchi’s death in 2013 had the potential to affect Nintendo’s corporate financial policy. Following his passing, Yamauchi’s family was left with a huge inheritance—but also an exorbitant inheritance tax bill. The family sought advice from Nintendo on how to deal with the matter. How could Nintendo solve this financial trouble in a way that balanced the interests of both the family and Nintendo’s management? For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

In early 2014, Standard Chartered PLC, a British multinational banking and financial services company headquartered in London, England, announced its restructuring plan. The announcement triggered positive reactions in both stock and bond markets. Nevertheless, the eventual profitability was not what was expected. Moving forward into 2015, how would a rational investor have taken advantage of such a corporate restructuring event? For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

In September 2011, San Miguel Corporation (SMC) celebrated its 122nd anniversary. Its chairman had just turned 76. Two years earlier, he had travelled to the United States to receive a cardiac ablation to correct an irregular heart rhythm. Succession-related questions were on his mind. SMC needed a clear plan for the leadership transition. The charismatic chairman spent his life successfully exploiting business opportunities, growing SMC from a small brewery company into a giant business group. By 2011, SMC was the largest corporation in the Philippines in terms of revenue—accounting for about 6 per cent of the country’s gross domestic product and employing about 17,000 people. The group engaged in a wide range of businesses including mining, oil refining and distribution, power, telecommunications, airlines, airports, and infrastructure. How could the company continue to thrive without its remarkable leader? Finding a path towards a smooth leadership succession would be a difficult task. For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

Mr. and Mrs. Wong and their three children had rented a condominium unit in Singapore for the past six years. During that time, they had been watching the property market with the objective of buying a home of their own. A larger unit in the same building finally became available for sale in June 2016. Coincidentally, their rental lease would expire soon after that date. If they decided to buy the larger unit, they would hold it for the next 10 years. Their net gain or loss of the buy versus rent decision would depend on the selling price of the unit at the end of 10 years and the rental payments. For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)

Neptune Orient Lines Limited (NOL) was started as Singapore’s national shipping line to facilitate industrial development and support the economy. The CMA CGM Group (CMA CGM) had acquired 67 per cent of NOL from Temasek Holdings Private Limited for SG$2.3 billion or $1.30 per share—a 6 per cent premium over the last closing price. In 2016, CMA CGM sought to acquire the remaining shares at the same price so that it could delist NOL and take it private. In order to delist, the company would need to acquire another 23 per cent of shares to hit the acceptance threshold of 90 per cent. Should the remaining shareholders sell their shares at $1.30 per share, or hold out for a better price? Should bondholders of CMA CGA and NOL be concerned about the acquisition? For NUS Business School: (Faculty only) To obtain a free copy of the case, please contact Ms Kwok Siew Geok (bizksg@nus.edu.sg)