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Can-One’s takeover offer for Kian Joo ‘not fair, but reasonable’

PETALING JAYA: Can-One Bhd’s mandatory takeover offer to acquire all the remaining shares in Kian Joo Can Factory Bhd it does not already owned at RM3.10 per offer share is deemed “not fair, but reasonable”.

Accordingly, independent adviser UOB Kay Hian Securities (M) Sdn Bhd (UOBKH) has recommended that shareholders accept the offer.

In assessing the reasonableness of the offer, UOBKH said it has taken into consideration the historical market prices and historical trading liquidity analysis of Kian Joo shares, listing status of Kian Joo and that there is no competing takeover offer.

“The offer price of RM3.10 is lower than the estimated fair value per Kian Joo share of RM3.35, representing a discount of 7.46%. Premised on the overall assessment of the offer price, the offer is not fair,“ UOBKH said in its independent advice circular.

However, it said the offer is reasonable as it provides an exit opportunity to shareholders to realise their investment in Kian Joo at the offer price.

“The offer price represents a premium of 52.71% over the last closing market price of the Kian Joo shares as at the last trading day (LTD) and a premium of between 14.81% and 51.22% over the five-day, one-month, three-month, six-month and one-year volume weighted average market price of Kian Joo shares up to and including the LTD.”

As at the last practicable date (LPD), it said the offer price still represents a premium of 1.31% over the last transacted price of RM3.06 per Kian Joo share.

UOBKH added that Kian Joo shares are illiquid, with a simple average monthly trading volume-to-free-float for the past one year up to November 2018 (being the last full trading month prior to the LTD) of 0.33%.

It also said the trading liquidity of Kian Joo shares is significantly lower than the average monthly trading liquidity to free float of the Bursa Malaysia Industrial Production Index of 11.71%.

Nonetheless, shareholders are advised to closely monitor the announcements made by the offeror and market price of the offer shares prior to the closing date before making decision as to whether to accept or reject the offer.

The non-interested directors concurred with the recommendation of UOBKH that the terms of the offer are not fair but reasonable. Accordingly, the non-interested directors recommended that shareholders accept the offer.

Can-One launched the mandatory takeover offer after its shareholdings in Kian Joo increased from 32.90% to 33.39% following the acquisition of a 0.49% stake at RM3.10 per Kian Joo share, which was completed on Feb 14, 2019.

Last month, some 99.07% of Can-One shareholders voted in favour of the company’s planned take over of Kian Joo.

Kian Joo’s share price gained 1 sen or 0.3% to RM3.07 today, while Can-One was unchanged at RM2.76.


Can-One’s MGO for Kian Joo “not fair but reasonable”

PETALING JAYA: Can-One International Sdn Bhd’s (CISB) mandatory takeover offer to acquire all the remaining shares in Kian Joo Can Factory Bhd it does not already owned at RM3.10 per offer share is deemed “not fair, but reasonable”.

Accordingly, independent adviser UOB Kay Hian Securities (M) Sdn Bhd (UOBKH) has recommended that shareholders accept the offer.

In assessing the reasonableness of the offer, UOBKH said it has taken into consideration the historical market prices and historical trading liquidity analysis of Kian Joo shares; listing status of Kian Joo and that there is no competing take-over offer.

“The offer price of RM3.10 is lower than the estimated fair value per Kian Joo share of RM3.35, representing a discount of 7.46%. Premised on the overall assessment of the offer price, the offer is not fair,“ UOBKH said in its independent advice circular.

However, it said the offer is reasonable as it provides an exit opportunity to shareholders to realise their investment in Kian Joo at the offer price.

“The offer price represents a premium of 52.71% over the last closing market price of the Kian Joo shares as at the last trading day (LTD) and a premium of between 14.81% and 51.22% over the five-day, one-month, three-month, six-month and one-year volume weighted average market price of Kian Joo shares up to and including the LTD.”

As at the last practicable date (LPD), it said the offer price still represents a premium of 1.31% over the last transacted price of RM3.06 per Kian Joo share.

UOBKH added that Kian Joo shares are illiquid, with a simple average monthly trading volume-to-free-float for the past one year up to November 2018 (being the last full trading month prior to the LTD) of 0.33%.

It also said the trading liquidity of Kian Joo shares is significantly lower than the average monthly trading liquidity to free float of the Bursa Malaysia Industrial Production Index of 11.71%.

Nonetheless, shareholders are advised to closely monitor the announcements made by the offeror and market price of the offer shares prior to the closing date before making decision as to whether to accept or reject the offer.

The non-interested directors concurred with the recommendation of UOBKH that the terms of the offer are not fair but reasonable. Accordingly, the non-interested directors recommended that shareholders accept the offer.

CISB, a wholly owned subsidiary of Can-One Bhd, launched the mandatory takeover offer after its shareholdings in Kian Joo increased from 32.90% to 33.39% following the acquisition of a 0.49% stake at RM3.10 per Kian Joo share, which was completed on Feb 14, 2019.


Can-One gets green light for take over of Kian Joo

PETALING JAYA: Some 99.07% of Can-One Bhd shareholders voted in favour of the company’s planned take over of its associate Kian Joo Factory Bhd for RM3.10 per share.

Following that, Kian Joo told Bursa Malaysia that it has received a notice of conditional mandatory take over offer from Can-One to acquire all the remaining 295.87 million shares or a 66.61% stake in Kian Joo not already owned by Can-One at RM3.10 apiece or RM912.15 million.

“In addition, the board, save for the interested Directors, i.e. Yeoh Jin Hoe and Chee Khay Leong, wishes to announce that UOB Kay Hian Securities (M) Sdn Bhd has been appointed to act as the independent adviser to advise the non-interested directors and the holders of the offer shares in respect of the fairness and reasonableness of the offer,” it noted.

Trading in Can-One and Kian Joo shares was suspended at 12.06pm and will resume from 2.30pm. Both counters were last traded 0.8% and 3.5% higher at RM2.60 and RM2.97, respectively.

The mandatory general offer (MGO) for Kian Joo comes after Can-One’s proposed acquisition of a 0.49% stake in Kian Joo from shareholder Tan Kim Seng for RM6.71 million or RM3.10 per share, raising its shareholding in Kian Joo to 33.39% from 32.9%.

Can-One and Kian Joo are both involved in the can manufacturing business, mainly serving the food and beverage industry.

Can-One had said the corporate exercise is part of the group’s expansion strategy to consolidate the can manufacturing business under Kian Joo in a bid to grow its sales and customer base.

It will also create enhanced scale and synergies for the enlarged Can-One group through, among others, streamlined procurement from suppliers to negotiate for bulk discount and improved operational efficiencies, resulting from economies of scale and integration.

The move, however, was reprimanded by the Securities Commission Malaysia as Can-One director and major shareholder Yeoh Jin Hoe and parties acting in concert (PACs) – including Can-One International Sdn Bhd (CISB) – failed to undertake a mandatory offer for the remaining shares in Kian Joo after their shareholdings triggered the 33% MGO threshold.

The SC imposed a penalty of RM455,000 against Yeoh and PACs as well as a restriction on the aggregate number of voting rights that may be exercised by the PAC in Kian Joo to not more than 33%.


Bumi Armada says it’s not in default risk

PETALING JAYA: Bumi Armada Bhd management said the group is not in a default risk despite pushing back its US$500 million (RM2.09 billion) debt restructuring plan to the first half of 2019( 1H19), according to UOB Kay Hian.

It was reported that Bumi Armada has missed its proposed October deadline to restructure the US$500 million worth of unsecured short-term loans due in three tranches by May 2019.

The group also has short-term debts of RM2.22 billion and RM1.95 billion debts that are ring-fenced around FPSO Kraken, which can be reclassified into long-term debts.

In maintaining a “buy” call on Bumi Armada with a target price of 66 sen, the research house said it does not anticipate the group to sink into the red and takes a wait-and-see approach towards 2019 on expectations for it to resolve its balance sheet issues.

UOB Kay Hian quoted Bumi Armada management as saying that the group is working with lenders and there are no defaults or any deadlines in the current renegotiation of extending the refinancing of short-term loans. It is also not considering an equity fund raising, and will not secure any projects in the near term until it resolves the balance sheet.

“Bumi Armada has no intention to go for a rights issue as it is pursuing other options – refinance, EMTN (Euro medium-term notes) or trust (infrastructure funds) – to raise funds. A rights issue at the current price would not raise much money and would further erode share price.”

While current risk-reward is palatable, the research house said stock sentiments will continue to be weak on balance sheet concerns and earnings confidence issue.

UOB Kay Hian also does not expect further major unexpected negative surprises in the earnings of the floating, production, storage and offloading (FPSO) segment after a cut in earnings forecasts earlier in view of potential downside to offshore marine service earnings in 2019.

Bumi Armada’s share price gained 1.3% to close at 39.5 sen today with 10.95 million shares changing hands.


MAHB downgraded on REIT plan, departure levy

PETALING JAYA: Analysts have downgraded Malaysia Airports Holdings Bhd (MAHB) after the government’s plan to set up the world’s first airport real estate investment trust (REIT) and departure levy for outbound air travellers.

On Monday, MAHB was the top four loser on Bursa Malaysia, tumbling 7.76% to RM7.61 with 7.45 million shares done.

HLIB Research said the establishment of the airport REIT to fund the airport capital expenditure (capex) is contradicting with the concept of regulated asset base (RAB), where MAHB incurs airport capex and become an asset heavy operator (as opposed to government’s intention to maintain MAHB as an asset light operator). Under the RAB structure, MAHB’s allowable earnings are dependent on the asset base size (driven by capex spent by MAHB).

“However, the airport REIT will limit MAHB capex and asset base size, hence affecting MAHB’s earnings outlook. Nevertheless, there are no clear guidelines and information regarding the airport REIT and RAB at the moment,” it explained.

HLIB downgraded MAHB to a “hold” call from “buy” with a lower target price of RM8 from RM10 after cutting its earnings for FY19 (-2.6%) and FY20 (-2.3%) as well as heightened earnings risk from the airport REIT and RAB.

UOB Kay Hian also downgraded MAHB to a “sell” call with a target price of RM7.40 versus RM8.30 previously, saying that the introduction of a REIT manager will effectively add a middleman who would require returns on investment higher than the Malaysian government. The latter, of course, benefits indirectly via positive externalities arising from increased tourism.

“We also believe that government would have to make the terms attractive for the REIT manager (with a mandate for 90% payout) and this could be at MAHB’s expense.”

It said MAHB’s CEO was on record saying that the continued annual rise in user fee by 25 basis points to a maximum of 30% was not commercially viable, but it would benefit equity investors and debt holders of the airport REIT. Annualising MAHB’s 1H18 user fee on the RM4 billion REIT investment would provide an annual yield of about 3%.

“Against such a backdrop, we are unsure to what extent MAHB or the Malaysian Aviation Commission could effectively propose a regulated asset base pricing and an incentive-based regulation for incremental capex. Current regulations also limit REITs from undertaking capex greater than 15% of its asset base. Given the regulatory risk and uncertainty, we do not have confidence in earnings or cash flow projection for 2019 and beyond,” said UOB Kay Hian.

Nomura, which maintained its “buy” call for MAHB with a target price of RM10.27, however, said the airport REIT will be neutral on MAHB, but may be positive in the longer term. Given the RM4 billion value of the 30% stake as mentioned by the government, it said this implies a market capital potential of RM13.3 billion for the airport REIT.


Asia’s stock benchmark enters bear market with no end in sight

454133BD-B5C2-4E43-AA51-8DD3CE699BC8

SINGAPORE: After a slump in U.S. stocks, Asia’s main equity gauge has finally succumbed, entering a bear market overnight. And Thursday isn’t looking pretty. The MSCI Asia Pacific Index fell 1.3 percent at 8:39 a.m. in Hong Kong, taking its slide from a January peak to 21 percent. Japan’s Topix index plunged 2.5 percent, heading for its lowest close since September 2017, while the Kospi 100 Index’s 2.1 percent slide took it into bear-market territory after data showed South Korea’s economy grew less than projected in the third quarter. ThisRead More


Exchange 106 – low occupancy ‘worrying’

PETALING JAYA: The committed occupancy of Exchange 106 Tower at TRX has fallen drastically to 10%, which is a concern amidst a subdued office market, said UOB Kay Hian.

“We understand that the Exchange 106 Tower is slated for completion by early 2019 and its first tenant will occupy the space in May 2019. However, we are concerned about its committed occupancy which has fallen drastically to 10% currently, compared to 50% pre-GE 14,” it said in its report today.

“With a persistently subdued office market (evidenced by low occupancy rates for office buildings in Kuala Lumpur), securing tenants will remain a key challenge for the TRX project which also faces competition from newer projects such as the PNB 118 and Bukit Bintang City Centre,” it added.

It noted that other ongoing office tower projects such as the Prudential HQ office is almost completed while two other office towers namely the HSBC Head Office and Affin Bank Head Office are under construction and both expected to be completed by end of 2020.

Meanwhile, the National Housing Policy 2.0, which is expected to be revealed in November or December, will benefit property developers who are focused on building houses below RM500,000.

“The new housing policy presents slight optimism for the sector as it is expected to tackle the high property prices and ease lending requirements – particularly for first-time home buyers,” said UOB Kay Hian.

The Ministry of Housing and Local Government has emphasised that it will address several issues including lowering house prices by reducing compliance cost and implementation of industrialised building systems.

In addition, the federal government is also working closely with state governments on land issues whereby the latter have been asked to submit a list of potential land plots that can be used for affordable housing projects.

“Potential measures that are proposed for the new housing policy include the extension of a maximum loan tenure to up to 40 years and to provide various types of loan structures like flexi loans, flexi interest rates and step-up schemes.

“These hybrid measures provide better flexibility for homeowners to own houses, and allow young homebuyers to own a house once they join the workforce,” said UOB Kay Hian.

At present, the maximum loan tenure is 35 years or until the borrower turns 70 years old, whichever is earlier.

Moving forward, the research house said that affordable housing will remain the key focus of developers. This is reflected by the rise in launches of residential properties priced below RM500,000, which grew from 52% of total launches in 2H17 to 65% in 1H18 as reported by the Real Estate and Housing Developers’ Association Malaysia.

“Separately, the association also outlined a few suggestions to encourage provisions of affordable housing which includes reduction of development charges, lower land conversion premium and exemption of capital contribution,” it said.

The Valuation and Property Services Department recently reported an increase of 18.1% in unsold and completed homes to a new record high of 29,277 units in 1H18, with majority of the overhang units being high-rise residences priced between RM500,000 and RM1 million.

“In view of this, we think that property developers that focus on the affordable housing segment may continue to report decent earnings while developers that focus on the premium market may face risk of slower take-up rates and their margins could be compromised,” said UOB Kay Hian.

It maintained “market weight” on the property sector and maintained “buy” calls on Malaysian Resources Corp Bhd and Gabungan AQRS Bhd. For exposure to the affordable housing theme, it prefers Mah Sing Group Bhd, on which it has a “hold” call and target price of RM1.23.


Exchange 106 – drastic drop in committed occupancy ‘worrying’

PETALING JAYA: The committed occupancy of Exchange 106 Tower at TRX has fallen drastically to 10%, which is a concern amidst a subdued office market, said UOB Kay Hian.

“We understand that the Exchange 106 Tower is slated for completion by early 2019 and its first tenant will occupy the space in May 2019. However, we are concerned about its committed occupancy which has fallen drastically to 10% currently, compared to 50% pre-GE 14,” it said in its report today.

“With a persistently subdued office market (evidenced by low occupancy rates for office buildings in Kuala Lumpur), securing tenants will remain a key challenge for the TRX project which also faces competition from newer projects such as the PNB 118 and Bukit Bintang City Centre,” it added.

It noted that other ongoing office tower projects such as the Prudential HQ office is almost completed while two other office towers namely the HSBC Head Office and Affin Bank Head Office are under construction and both expected to be completed by end of 2020.

Meanwhile, the National Housing Policy 2.0, which is expected to be revealed in November or December, will benefit property developers who are focused on building houses below RM500,000.

“The new housing policy presents slight optimism for the sector as it is expected to tackle the high property prices and ease lending requirements – particularly for first-time home buyers,” said UOB Kay Hian.

The Ministry of Housing and Local Government has emphasised that it will address several issues including lowering house prices by reducing compliance cost and implementation of industrialised building systems.

In addition, the federal government is also working closely with state governments on land issues whereby the latter have been asked to submit a list of potential land plots that can be used for affordable housing projects.

“Potential measures that are proposed for the new housing policy include the extension of a maximum loan tenure to up to 40 years and to provide various types of loan structures like flexi loans, flexi interest rates and step-up schemes.

“These hybrid measures provide better flexibility for homeowners to own houses, and allow young homebuyers to own a house once they join the workforce,” said UOB Kay Hian.

At present, the maximum loan tenure is 35 years or until the borrower turns 70 years old, whichever is earlier.

Moving forward, the research house said that affordable housing will remain the key focus of developers. This is reflected by the rise in launches of residential properties priced below RM500,000, which grew from 52% of total launches in 2H17 to 65% in 1H18 as reported by the Real Estate and Housing Developers’ Association Malaysia.

“Separately, the association also outlined a few suggestions to encourage provisions of affordable housing which includes reduction of development charges, lower land conversion premium and exemption of capital contribution,” it said.

The Valuation and Property Services Department recently reported an increase of 18.1% in unsold and completed homes to a new record high of 29,277 units in 1H18, with majority of the overhang units being high-rise residences priced between RM500,000 and RM1 million.

“In view of this, we think that property developers that focus on the affordable housing segment may continue to report decent earnings while developers that focus on the premium market may face risk of slower take-up rates and their margins could be compromised,” said UOB Kay Hian.

It maintained “market weight” on the property sector and maintained “buy” calls on Malaysian Resources Corp Bhd and Gabungan AQRS Bhd. For exposure to the affordable housing theme, it prefers Mah Sing Group Bhd, on which it has a “hold” call and target price of RM1.23.


Analysts: StarHub retrenchments possibly sign of things to come for Singapore telcos

SINGAPORE, Oct 5 — The telecommunications sector is in for a difficult ride, with the retrenchments by StarHub possibly a sign of things to come. Already facing declining earnings due to the emergence of several mobile virtual network operators…


VS expands capacity to meet rising demand

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A spokesperson for VS Industry told StarBiz that the company has added more production floor space and the new capacity is expected to be taken up by its existing key clients and other prospective customers PETALING JAYA: Capacity expansion is the key mantra for any company’s sustainable operational growth, and VS Industry Bhd seems to understand the game well. While it continues to grapple with higher business costs, the integrated electronics manufacturing services player has been ramping up its production capacity in anticipation of new orders. A spokesperson for VS IndustryRead More