Showing posts with label Mamee. Show all posts
Showing posts with label Mamee. Show all posts

Thursday 14 April 2011

Mamee-Double Decker’s privatisation on track

Thursday April 14, 2011

Mamee-Double Decker’s privatisation on track


MAMEE-DOUBLE Decker (M) Bhd has been in the limelight recently due to a privatisation proposal by major shareholders in a selective capital reduction (SCR) and repayment exercise under Section 64 of the Companies Act, 1965. This is a privatisation route that has been used successfully by several other companies.

Some examples are Halim Mazmin Bhd and Telekom Malaysia Bhd (TM) unit VADS Bhd, both of which were de-listed in 2009.

Jupiter Securities head of research Pong Teng Siew says for some companies, the SCR is a preferred method for privatisation as the company foots the bill to pay off minority shareholders.

“Perhaps one out of 100 companies will use this method rather than making a general offer. Normally companies that use this method are quite strong financially. Also, the company would have strong cash flows, a good track record over the long term, the share is undervalued (cheap in context of price to earnings ratio - PE). A good yard stick would be share price to cash flow ratio.”

However, Pong pointed out that the company's gearing level can balloon substantially if the SCR was successfully concluded.

Affin Investment Bank Bhd research head Andy Ong shared a similar opinion.

As far as the offer is concerned, most analysts agree that minority shareholders of Mamee-Double Decker are getting a “fair deal” based on the capital repayment offer of RM4.39 per share, which as pointed out by Jupiter Securities, represented a 21.9% premium over the last traded price of RM3.60 prior to its trading suspension and 2.6 times book value as at end-Dec 2010.

The research house points out that the offer is 9.2% lower than the firm's fair value of RM4.75, which is based on 13 times price to earnings ratio (on FY11 projected earnings per share of 36.5 sen.

Mamee-Double Decker's shares surged 17% or 60 sen on Monday to close at RM4.20 following the announcement.

However, there was no change in the closing price of Mamee-Double Decker's shares yesterday which had a day high of RM4.21. The volume traded yesterday was also low at 199,500 shares.

Jupiter Securities said “at the closing price of RM4.20, the stock is still about 4.3% away from the offer price of RM4.39. With the time needed to complete the deal estimated at six months, annualised return at current price is slightly in excess of 8%.” The report added that the risk of a non-successful conclusion of the privatisation was low, as the offer price is at 22% above the pre-suspension price.

Mamee-Double Decker in its announcement last Friday, had said “the board is concerned about the trend of increasing raw material prices as well as foreign exchange volatility amidst the uncertain economic environment.

Mamee-Double Decker plans to fork out RM100mil capital expenditure this year to upgrade its facilities and machinery in Malacca.

The company also noted that its shares had been thinly traded.

Jupiter Securities said “the low trading volume arose from a “chicken and egg” situation where fund managers that are interested in the stock are unable to get meaningful amount of shares without driving the price up. On the other hand, the controlling shareholders with a 71.9% stake are unwilling to part with their holding at a give-away price.”

Hence, the privatisation would help resolve the valuation issue for the major shareholders and permit minority shareholders to exit at a premium to the market price.

However, the privatisation exercise, if successful, would result in a substantially higher level of gearing.

Under the plan, major shareholders of Mamee-Double Decker who control the company would repay RM179.8mil or RM4.39 a share to minority shareholders.

The report said there was a possibility that post-privatisation, a new equity partner would take up a substantial stake in the company and would provide the funds for its expansion and reduce the gearing. It further speculated a possible re-listing of Mamee-Double Decker a “few years down the road.”

http://biz.thestar.com.my/news/story.asp?file=/2011/4/14/business/8478809&sec=business

Tuesday 12 April 2011

Mamee-Double Decker offer seen as fair

Tuesday April 12, 2011

Mamee-Double Decker offer seen as fair
By THOMAS HUONG
huong@thestar.com.my

Analysts say privatisation price of RM4.39 per share acceptable

PETALING JAYA: While minority shareholders have the right to reject the offer to privatise Mamee-Double Decker (M) Bhd, analysts contacted by StarBiz say the capital repayment offer of RM4.39 per share is a fair deal.

Last Friday, the major shareholders of Mamee-Double Decker, who own 72% of the company, proposed a privatisation of the company via Section 64 of the Companies Act, 1965, which entails a capital reduction and repayment.

Such a proposal will require the approval of 75% of the minority shareholders of Mamee-Double Decker. In other words, the Pang family, which controls 72% of Mamee-Double Decker, will not be able to vote on this proposal.

An analyst from Kenanga Research recommends that shareholders accept the proposal as the offer price is at a historical price to earnings ratio (PE) of 15 times.

“The offer is attractive as our fair value is RM3.65 a share,” he said.

Another analyst from a local research firm pointed out that Mamee-Double Decker had plans for a RM100mil capital expenditure (capex) this year to upgrade its facilities and machinery in Malacca.

“A substantial capex may result in higher borrowing costs, which would affect dividend payments,” he said.

Mamee-Double Decker has a gross dividend yield of 2.62%, according to Bloomberg data.

The company itself had articulated this in its announcement of the exercise, when it said that “to fund the capital expenditure, the group may need to incur higher bank borrowings and this may result in higher borrowing costs which will then affect the dividend payment capability of Mamee-Double Decker in the immediate term.”

The company also noted that its shares had been thinly traded. In its announcement on Friday, Mamee-Double Decker pointed out that the daily average trading volume of its shares over the past one year was approximately a mere 0.22% of its total free float.

It said that given the “challenging environment and low trading liquidity” of its shares, the selective capital repayment represents “an opportunity for entitled shareholders to realise their investments in Mamee-Double Decker at an attractive premium above the historical trading prices.”

Another analyst said his research firm has maintained a fair value of RM4.44 a share for Mamee-Double Decker.

“Despite this, we still recommend acceptance of the offer of RM4.39 a share at this juncture,” he said.

OSK Research analyst Eing Kar Mei shares the same view.

“Our target price, based on FY10 results, was RM3.44 a share.

“Also, there are concerns over rising commodity prices, and margins may be under pressure as the company plans to spend a substantial amount on upgrading and expansion exercises,” said Eing.

However, Eing pointed out that the privatisation plan was far from being a done deal as Mamee-Double Decker needed to obtain approval from 75% of the remaining minority stakeholders.

To be noted is that the controlling shareholders, namely the Pang family and associated parties, would waive their entitlement from receiving cash under the capital repayment exercise.

OSK Investment Bank Bhd and OCBC Advisers (Malaysia) Sdn Bhd are the principal adviser and the financial adviser respectively for the exercise.

Mamee-Double Decker's shares surged 17% or 60 sen yesterday to close at RM4.20.

http://biz.thestar.com.my/news/story.asp?file=/2011/4/12/business/8462902&sec=business



Related:
Almost as many companies taken private as IPOs the past 6 months
http://myinvestingnotes.blogspot.com/2011/04/almost-as-many-companies-taken-private.html

“There are multiple reasons why companies are taken private. For instance, the owners of a company sees value in a company and will rather privatise it so that the profits can be kept for themselves. Also, some owners may want to list the company in other markets such as Hong Kong as they seek out better value,”said TA Securities Holdings Bhd head of research Kaladher Govindan.

Wednesday 17 November 2010

Mamee-Double Decker (M) Berhad



Date announced 23/08/2010
Quarter 30/06/2010 Qtr 2 FYE 31/12/2010

STOCK Mamee C0DE  5282 

Price $ 3.53 Curr. ttm-PE 9.92 Curr. DY 2.99%
LFY Div 10.56 DPO ratio 30%
ROE 21.8% PBT Margin 11.0% PAT Margin 8.8%

Rec. qRev 120198 q-q % chg 4% y-y% chq 17%
Rec qPbt 13229 q-q % chg -17% y-y% chq -1%
Rec. qEps 7.24 q-q % chg -12% y-y% chq -1%
ttm-Eps 35.59 q-q % chg 0% y-y% chq 39%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 8.00 Avg. L PE 6.00
Forecast High Pr 3.63 Forecast Low Pr 2.01 Recent Severe Low Pr 2.01
Current price is at Upper 1/3 of valuation zone.

RISK: Upside 6% Downside 94%
One Year Appreciation Potential 1% Avg. yield 4%
Avg. Total Annual Potential Return (over next 5 years) 5%

CPE/SPE 1.42 P/NTA 2.17 NTA 1.63 SPE 7.00 Rational Pr 2.49



Decision:
Already Owned: Buy, Hold, Sell, Filed; Review (future acq): Filed; Discard: Filed.
Guide: Valuation zones - Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr