Written by Kamarul Azhar
Friday, 20 May 2011 12:48
KUALA LUMPUR: The proposed merger of YTY Industry Holdings Sdn Bhd’s wholly-owned subsidiaries with Latexx Partners Bhd is viewed as a positive surprise by analysts. It will create the largest nitrile glove player in the world and the third most profitable rubber glovemaker after Hartalega Corp Bhd and Top Glove Corp Bhd.
According to a CIMB report yesterday, the merged entity would have a combined capacity of 16.2 billion gloves with an estimated 12.8 billion pieces of nitrile capacity, which is a commanding 36% market share. YTY has been focusing on nitrile gloves that make up almost 90% of its production mix.
“We take a positive view of the merger as it could create the largest nitrile glove player in the world. The proposal values YTY at a historical price-earnings ratio of 11.3 times. Assuming FY12/13 earnings growth of 15% per year, in line with demand growth for nitrile gloves, YTY could be valued at a CY12 PER of 8.8 times, a slight premium over the sector’s 8.6 times,” said the report.
Latexx told Bursa Malaysia on Wednesday that it had received a merger proposal from YTY to acquire the latter’s four wholly-owned subsidiaries for RM1.37 billion to be satisfied by RM409.5 million cash from Latexx and 382.2 million new Latexx shares of 50 sen par value at an issue price of RM2.50 per share.
The offer will remain open for acceptance for 21 days.
The proposal arrived just two days after the proposed buyout by Navis Asia VI Management Co Ltd for RM852 million fell through.
CIMB said the proposed Latexx-YTY merger could create an entity that can match Hartalega based on profitability and valuation. Based on CIMB’s pro forma net profit forecast for Latexx of RM162.3 million for the last four quarters, the merged entity could have exceeded Top Glove’s profitability and narrow its valuation as a discount to Hartalega.
“Both Latexx and YTY’s factories are located in Perak; Latexx in Kamunting and YTY in Sitiawan. Note that our pro forma net profit of RM162.3 million has not adjusted for potential cost and revenue synergies arising from the merger,” CIMB said, adding that cost savings of 10% could raise the merged company’s net profit to circa RM180 million.
CIMB also expects the proposed merger to result in Latexx’s existing shareholders enjoying a 20.2% rise in the value of their shares, assuming their equity interest in Latexx is valued at 10.7 times forward PER.
The research house maintained its “neutral” call on Latexx, and recommended a switch to Kossan Rubber Industries Bhd and Hartalega.
This article appeared in The Edge Financial Daily, May 20, 2011.
Friday, 20 May 2011 12:48
KUALA LUMPUR: The proposed merger of YTY Industry Holdings Sdn Bhd’s wholly-owned subsidiaries with Latexx Partners Bhd is viewed as a positive surprise by analysts. It will create the largest nitrile glove player in the world and the third most profitable rubber glovemaker after Hartalega Corp Bhd and Top Glove Corp Bhd.
According to a CIMB report yesterday, the merged entity would have a combined capacity of 16.2 billion gloves with an estimated 12.8 billion pieces of nitrile capacity, which is a commanding 36% market share. YTY has been focusing on nitrile gloves that make up almost 90% of its production mix.
“We take a positive view of the merger as it could create the largest nitrile glove player in the world. The proposal values YTY at a historical price-earnings ratio of 11.3 times. Assuming FY12/13 earnings growth of 15% per year, in line with demand growth for nitrile gloves, YTY could be valued at a CY12 PER of 8.8 times, a slight premium over the sector’s 8.6 times,” said the report.
Latexx told Bursa Malaysia on Wednesday that it had received a merger proposal from YTY to acquire the latter’s four wholly-owned subsidiaries for RM1.37 billion to be satisfied by RM409.5 million cash from Latexx and 382.2 million new Latexx shares of 50 sen par value at an issue price of RM2.50 per share.
The offer will remain open for acceptance for 21 days.
The proposal arrived just two days after the proposed buyout by Navis Asia VI Management Co Ltd for RM852 million fell through.
CIMB said the proposed Latexx-YTY merger could create an entity that can match Hartalega based on profitability and valuation. Based on CIMB’s pro forma net profit forecast for Latexx of RM162.3 million for the last four quarters, the merged entity could have exceeded Top Glove’s profitability and narrow its valuation as a discount to Hartalega.
“Both Latexx and YTY’s factories are located in Perak; Latexx in Kamunting and YTY in Sitiawan. Note that our pro forma net profit of RM162.3 million has not adjusted for potential cost and revenue synergies arising from the merger,” CIMB said, adding that cost savings of 10% could raise the merged company’s net profit to circa RM180 million.
CIMB also expects the proposed merger to result in Latexx’s existing shareholders enjoying a 20.2% rise in the value of their shares, assuming their equity interest in Latexx is valued at 10.7 times forward PER.
The research house maintained its “neutral” call on Latexx, and recommended a switch to Kossan Rubber Industries Bhd and Hartalega.
This article appeared in The Edge Financial Daily, May 20, 2011.
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