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.
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.
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