KUALA LUMPUR (May 30): Independent adviser TA Securities Holdings Bhd has advised the non-interesed directors and shareholders of MBf Corp Bhd to vote in favour of the proposed selective capital reduction (SCR) at the upcoming extraordinary general meeting (EGM) on June 28, as it said while the deal was unfair, it was nonetheless a reasonable one.
Leisure Holidays Holdings Sdn Bhd (LHHSB), which is MBf Corp’s largest shareholder with a 39.94% stake, is proposing to undertake the SCR, which entails the repayment of 9.5 sen per share in the group to all of its other shareholders.
MBf Corp, which is an investment holding company, has subsidiaries involved in property development, leisure and timeshare businesses.
The group was delisted from Bursa Malaysia in August 2007, after its financial condition became inadequate to warrant its continued listing on the local bourse.
TA Securities said the fair value of MBf Corp’s shares, estimated based on the revised net asset valuation (RNAV) approach, is 14.9 sen, which is 36.24% higher than the 9.5 sen offered by LHHSB.
It noted that the RNAV per share of 13.7 sen stated in the offer letter was based on MBf Corp’s audited consolidated statement of financial position as at Dec 31, 2021, while the RNAV of 14.9 sen is based on the audited consolidated statement of financial position as at Dec 31, 2022.
“It should be noted that the RNAV of the group is derived based on the presumption that the group is able to realise all the revalued properties on willing-buyer willing-seller basis in the open market at their respective market values, as appraised by the independent valuers, without considering the restrictions under the timeshare schemes,” it said.
TA Securities noted that the realisation of the market values of its timeshare accomodation units may be affected by uncertainties that include the timing of the units being released from the timeshare schemes, obtaining approvals from timeshare members, and the condition of the units, as well as the property market conditions when the group decides to sell the units.
The independent adviser also warned that in a liquidation scenario, shareholders may not be able to realise the full RNAV of the group immediately, as the timeshare units may be sold at forced sale values, while the trustee of the trust deeds governing the timeshare schemes which the units are lodged under, may seek direction from the court for, among other matters, compensation of the members.
“As such, there is no assurance that the group will be able to realise such assets at the estimated RNAV of the group presently, or in the future,” it said.
However, TA Securities said if the SCR is not approved by shareholders, they may be able to benefit from any realisation of the RNAV of the group at a later date, subject to the factors and uncertainties it had outlined.
On the other hand, TA Securities said the proposed SCR is reasonable, as it enables shareholders to realise their holdings in the company, which has been unlisted for more than 15 years, and has not declared a dividend for the past 10 years.
It also said the ageing conditions of MBf Corp’s holiday apartments and resorts will result in higher maintainance costs, while cash receipts derived from the annual maintanence fees from timeshare memberships have been declining and will continue to decline, as the membership programme has been discontinued while existing memberships expire.
TA Securities also added that there are no alternative offers for MBf Corp shares.
“The non-entitled shareholders (LHHSB) are able to have significant influence over the outcomes of all ordinary resolutions sought, and block special resolutions at the shareholders’ meetings of the company for which the non-entitled shareholders are not required to abstain from voting,” it said.