Welcome once again to this week’s top stock highlights where we present snippets of information from various companies and topics.
Mapletree Commercial Trust (SGX: N2IU) and Mapletree North Asia Commercial Trust (SGX: RW0U)
We had previously written on the proposed merger between Mapletree Commercial Trust (MCT), and Mapletree North Asia Commercial Trust (MNACT) in a deal worth S$4.2 billion.
To recap, MCT offered two options for unitholders of MNACT.
The first was a scrip-only option where every unit of MNACT can be exchanged for 0.5963 units of MCT.
The second, a cash-and-scrip option, offered 0.5009 MCT units per MNACT unit along with S$0.1912 in cash.
On Monday, MCT announced a third option which will become the default option for all MNACT unitholders.
The third option is a cash-only consideration whereby unitholders of MNACT will receive S$1.1949 in cash for every unit they own.
This new option is in line with the original offer by MCT of S$1.1949 per MNACT unit and with the financial effects remaining similar to the initial two options.
It was proposed to provide for MNACT more flexibility to choose if they wished to own units of the enlarged REIT, Mapletree Pan Asian Commercial Trust, or MPACT, or if they wished to exit their investment fully.
To achieve this, MCT announced a preferential offering of units to raise to S$2.2 billion to finance the additional cash requirement for option three.
Mapletree Investments Pte Ltd, the sponsor for both REITs, has agreed to subscribe for its proportional share.
A maximum of around 1.1 billion new units will be issued at a unit price of S$2.0039, and the application is expected to take place by the end of July 2022 after all the required approvals have been sought concerning this merger.
Berkshire Hathaway (NYSE: BRK.B)
Warren Buffett, arguably one of the world’s best investors, is once again doing what he does best — acquiring companies.
Berkshire Hathaway, where Buffett is Chairman and CEO, announced this week that it was buying Alleghany Corporation (NYSE: Y) for US$11.6 billion in cash.
Alleghany is a leader in property and casualty insurance and reinsurance and reported a stellar set of earnings for its fiscal 2021 (FY2021).
Total revenue jumped by 34.9% year on year to US$12 billion while net profit soared ten-fold year on year to US$1 billion.
Buffett’s company will snap up shares of Alleghany for US$848.02 each, a 29% premium to its average share price over the last 30 days.
With this purchase, Buffett is returning to his insurance roots.
Back in 1996, Buffett had purchased the stock of GEICO, an insurance giant, making it a subsidiary of Berkshire Hathaway.
This acquisition is also Berkshire’s largest since its 2016 purchase of Precision Castparts and helps to partially deploy the former’s burgeoning cash balance.
Singapore’s core inflation
Singapore’s core inflation had touched 2.4% back in January this year, a nine-year high.
The rise in prices was driven by higher costs for food, electricity, and gas.
February once again saw core inflation hit 2.2%.
Although this was slightly down from 2.4% in January, it has remained elevated due to global supply chain issues and recovering consumer demand.
The Russia-Ukraine war has resulted in food prices increasing across the board, which will feed into higher inflation in future months.
Meanwhile, the Singapore government is going ahead with its plan to raise the Goods and Services Tax (GST) from the current 7% to 9% eventually as announced in this year’s Budget.
Brent crude oil is currently hovering at US$120 per barrel, and Goldman Sachs forecasts that it could potentially reach US$200 per barrel, triggering a drain on consumer spending and tipping the US economy into a recession.
Drivers continue to feel the pinch as pump prices exceed S$3 per litre, and this will push up their monthly budget.
With so many factors at play that will contribute to higher inflation, it’s not surprising if you feel that the value of your dollar is being slowly eaten away.
The solution for this is to invest your money in strong companies whose growth can help you to offset inflation.
Another option is to purchase units of well-managed REITs that sport distribution yields above the inflation rate.
These moves can help you to preserve and grow your purchasing power over time.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
