KUALA LUMPUR (Sept 11): The takeover offer of Ge-Shen Corp Bhd at a cash offer price of 81 sen a share by Pelita Niagamas Sdn Bhd, which is inclusive of an 81 sen for each redeemable convertible preference share (RCPS), is deemed fair and reasonable.
According to independent adviser TA Securities in a circular to shareholders today, TA Securities said the 81 sen per share offer price is at a premium of 22.73% to the adjusted net asset value per Ge-Shen share of 66 sen.
“The offer price represents a premium of between 2.92% and 8.92% to the 6-month and 1-year volume weighted average market price (VWAMP) of Ge-Shen shares up to (the last trading date prior to the notice served) on Aug 10, which was at 80.5 sen,” TA Securities said.
It added that the offer is reasonable as Ge-Shen has not received any competing offer, neither does it intend to seek an alternative person to make a takeover offer to.
However, the board, in the same circular, has unanimously recommended its shareholders to reject the offer.
This is after taking into consideration the current and future prospects of the Ge-Shen Group, it noted.
As example, the board cited the purchase of Polyplas Sdn Bhd — a Penang-based plastics parts manufacturer — which was intended to strengthen Ge-Shen’s position in the plastics manufacturing industry and improve the group’s earnings base.
Chan Choong Kong, the controlling stakeholder of Pelita Niagamas, was appointed as the executive director of Ge-Shen on April 23 following Pelita Niagamas’ subscription of 25 million or 83.33% of Ge-Shen’s RCPS, which was issued to part-finance the acquisition of Polyplas.
Chan is the non-executive director in Opus Asset Management Sdn Bhd, a fund management company.
For the second quarter ended June 30 (2QFY15), Ge-Shen’s net profit jumped to RM2.3 million from just RM399,000 in the same quarter a year earlier, while revenue grew 52% year-on-year to RM36.2 million.
To recap, Ge-Shen received a mandatory takeover offer from Pelita Niagamas on Aug 11, which was triggered after Pelita Niagamas swept up a 38.36% stake in Ge-Shen for RM23.9 million, cash, via direct business transactions that same day.
This raised Pelita Niagamas’ stake to 52.67%, with 40.5 million Ge-Shen shares.
It is worth noting that Ge-Shen shares have risen sharply before the takeover offer was announced.
The stock, which is now up 71.43% year-to-date, hit a multi-year high of RM1.02 on Aug 3, before paring some gains.
Today, the counter closed 18.5% or 15 sen higher at 96 sen from yesterday’s close. The current price gives it a market capitalisation of RM72.83 million.
It was also highlighted as one of the stocks with positive momentum highlighted by The Edge Research today.
(Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)