MGO for Tradewinds group not attractive, say research firms
KUALA LUMPUR: Shareholders of Tradewinds Corporation Bhd and its two listed subsidiaries have been urged to reject the mandatory general offer (MGO) made by its major shareholder Perspective Lane (M) Sdn Bhd as the offers were not attractive, according to research houses.
The two subsidiaries are Tradewinds Plantation Bhd (TWP) and Tradewinds (M) Bhd (TWP). Perspective Lane is making an offer for Tradewinds Corp shares and ICULs at RM1.36 each, TWP shares and ICULS at RM2.73 and RM1.71 a unit respectively, and TWM at RM3.80 a share.
Aseambankers Malaysia Equity Research said that it did not believe the offer prices for TWP was a good reflection of its fair values and that the amount of cash required to privatise the entire group by Tan Sri Syed Mokhtar Al-Bukhary the owner of Perspective Lane could prove too burdensome for now.
It believed the offer price should be higher as the RM2.73 offer price was a slight discount over its current price of RM2.74 while the ICULS offer price of RM1.71 represented a 5.6% premium over its latest market price.
We believe that the offer price could have been higher as Tradewinds Plantation is presently undergoing major internal restructuring which should lead to a strong turnaround in terms of performance over the next 12 months supported by high crude palm oil prices of more than RM2,400 per metric tonne,¡¨ said the research house, adding that it reiterate its trading buy call on TWP at RM2.74 with a target price of RM4.40.
The research house believed that the MGO was merely a formality¡¨, and was not the intention of Syed Mokhtar to privatise the group at this point, as the offer was priced near its recent share price.
Kenanga Research, in its report, called on TWM shareholders not to accept the offer as it is lower than its net tangible assets of RM3.90 per share and real net asset value of RM4.98 each. Tradewinds shareholder, it said, should also not accept the offer of RM1.36 a share.
However, the research house advised TWP shareholders to accept the offer for the shares as the deep discount to its peers, which are trading in the 15-20 times price earning ratio (PER) band, was justified due to its high crude palm oil cost.
Kenanga also advised investors not to accept the RM1.71 offer price for TWP ICULS as it implied an extremely cheap FY08E PER of only 7 times and there was no cash payment required to convert the ICULS into ordinary shares.
Besides the MGO, Tradewinds Corp also announced yesterday its proposal to divest its 53.02% stake in TWP at RM3.80 a share to shareholders to reposition itself as a significant property player in the Iskandar Development Region in Johor.
It also planned to acquire three companies which own about 367.1ha piece of land in Nusajaya, Johor for RM145 million. The company will undertake a m ed development project with a gross development value of RM2.1 billion.