Wee Hur sells student accommodation assets in Australia, what does it mean for shareholders?

In December 2023, Wee Hur Holdings announced the sale of its student accommodation assets in Australia for A$1.6 billion, which is approximately S$1.37 billion. The buyer is Greystar, a real estate services provider. This sale is anticipated to yield Wee Hur net proceeds of about $320 million in cash, pending consent from shareholders and regulatory approvals. Additionally, the company will retain a 13% stake in the newly formed ownership entity, valued at A$208 million. As of June 2024, Wee Hur reported a net profit of $75 million for the first half of the year. This figure includes almost $60 million from a joint venture with the Government of Singapore Investment Corporation, known as GIC. The company is expected to replicate or even exceed first-half profits for the second half, particularly due to the agreement reached on the asset sale. This could lead to overall profit projections for the year reaching $150 million, translating to a low price-earnings multiple of 2.6 times. Further financial benefits are expected, as the final proceeds from Wee Hur's sale of a 49.9% stake in its purpose-built student accommodation portfolio to GIC are scheduled for disbursement in 2025. An immediate payment of A$19.8 million is expected to be made soon. By mid-2024, Wee Hur had reported $117 million in cash reserves, and with expected payments from the asset sale and continued revenues from its accommodations, by 2025, the cash balance could reach around $500 million. In light of this financial influx, PhillipCapital, a research firm, has suggested a strong possibility of Wee Hur declaring special dividends, drawing on the company’s history of doing so during financially successful periods. If Wee Hur were to disburse $200 million in dividends, it could equate to nearly 22 cents per share, while still maintaining a substantial cash reserve of approximately $300 million. The potential special dividends raise questions about how the controlling family, primarily the Goh family, would benefit since they hold a significant portion of shares in the company. The future landscape for Wee Hur includes a mix of income-generating properties, including 25,744-bed dormitories and additional PBSAs, alongside construction and property ventures in Australia. In conclusion, the sale of the student accommodation assets positions Wee Hur Holdings to enhance shareholder value through potential dividend payouts, while setting the stage for ongoing growth and profitability in the property development market. The combination of cash reserves and continued income streams from existing properties allows the company to strategically navigate its future developments while rewarding its shareholders generously.