AmInvestment: Offer price for MTD unfair

Friday January 21, 2011

By SHARIDAN M. ALI 

sharidan@thestar.com.my

PETALING JAYA: AmInvestment Bank said the takeover offer of MTD Capital Bhd by four firms at RM9.50 per share was not reflective of the potential of the group.

Based on the profile of the MTD group, which was involved in toll concession, property development as well as engineering and contruction, “it would be appropriate to value the business segment separately to arrive at the aggregate valuation of the group on sum-of-parts basis,” the independent adviser said.

“We have computed the sum-of-parts valuation (SPOV) of MTD group to be about RM3.1bil. And based on MTD's issued and paid-up capital of 247.5 million shares, the value attributable to each MTD share is at RM12.72.

“Thus, the cash offer price of RM9.50 per share represents a discount of RM3.22 or approximately 25% to the SPOV of RM12.72.

“Based on this, we are of the view that the offer price is not fair due to the significant discount accorded to the indicative SPOV per MTD share.”

AmInvestment said to realise the full RM12.72, investors would have to maintain their shareholding in MTD for the entire duration of the concession with the assumption that MTD distributed all its net cash flow derived from businesses and realisation of all its assets.

“The indicative SPOV is derived based on the present value of all the net cash flows of MTD's existing businesses and assets are being realised at the same point of time,” it said.

MTD non-interested directors also concurred with the recommendation of AmInvestment and advised shareholders to reject the offer.

MTD, the country's second largest highway operator and owner, has received an offer from four companies to take it private on Dec 20, 2010, effectively valuing it at RM2.35bil.

The companies which held a total stake of 53.13% in MTD, made a conditional takeover offer to acquire the remaining 116.02 million shares or 46.87% of the issued and paid-up capital of MTD for a cash offer of RM9.50 per share, or a total of RM1.1bil.

The joint offerors are Nikvest Sdn Bhd, Alloy Consolidated Sdn Bhd (Alloy),Alloy Concrete Engineering Sdn Bhd (ACE) and Alloy Capital Sdn Bhd (AC) which hold 131.48 million MTD shares in total.

Alloy, ACE and AC hold direct interest of 26.01%, 3.40% and 0.91%, respectively, in the company while Nikvest currently holds a 22.81% stake.

Nevertheless, AmInvestment said the offer provided a chance for MTD shareholders to unlock the value of their shareholding at a premium of RM1.18 or 14.2% against RM8.32 - the five-day volume weighted average market price (VWAP) to Dec 17, 2010, being the last full market day prior to the notice of the takeover.

“The offer price also represents a premium of 6.7% to the closing market price of MTD shares on Dec 17, of RM8.90.

“Also, based on historical market prices of MTD shares, there is no assurance that the price of MTD shares will remain at the current level after the close of the offer,” it said.

MTD share price closed at RM9.61, up 11 sen on Jan 19.

In terms of the premium to precedent privatisation transactions, AmInvestment said the premium of 14.2% over MTD five-day VWAP up to Dec 17, 2010 was within the range when compared with the premiums paid for successful local privatisation over last two years of between 5% and 29.9%.