Rex's subsidiaries are involved in the manufacturing and distribution of canned food, frozen foods and drinks.
KUALA LUMPUR: The minority shareholders of Rex Industry Bhd
have been advised to reject the takeover offer from its managing director Darmendran A/L Kunaretnam and Chee Cheng Chun at RM1.65 a share.
MainStreet, which is the independent adviser, said on Friday although the offer can be deemed reasonable, the offer price represents a substantial discount of 35.29% against the estimated realised net asset value (RNAV) per Rex share of RM2.55.
“However, holders who wish to exit their investments in Rex can also consider selling the Rex shares in the open market if they are able to obtain a higher price than the offer price, net of transaction cost.
“Accordingly, MainStreet recommend that the holder reject the offer,” it said.
The non-interested directors of Rex – Tan Sri Mohd Ibrahim bin Mohd Zain; Lee Soo Keat; Mohd Faisal Izan Abdul Latiff; and Tai Keat Chai – concurred with the evaluation and recommendation of MainStreet that although the offer can be deemed “reasonable”, the “not fair” view outweighs the “reasonable” view.
“Accordingly, the board recommends that you reject the offer,” it said.
Rex's subsidiaries are involved in the manufacturing and distribution of canned food, frozen foods and drinks.
MainStreet explained that the manufacturing industry in general has been facing challenges such as rising cost of raw materials, coupled with difficulty of passing on increased costs to consumers given the prolonged soft consumer sentiments and other macroeconomics factors, which had directly and indirectly affected the business of companies like Rex.
It pointed out that based on the audited financial statements, Rex has a substantial holding in assets, and significant investments in land and buildings for the past three financial years.
However, the group’s past financial performance has been inconsistent, where the profit after tax has been fluctuating over the past three financial years. It posted audited profit after tax for its continuing operation of RM2.11mil for FYE 31 Dec 2013.
However, it recorded loss after tax for its continuing operation of RM180,000 and RM770,000 for FYE Dec 31, 2014 and 18-month FPE June 30, 2016, respectively and an unaudited year-to-date profit after tax of RM2.73mil for the six-month FPE Dec 31, 2016.
“In view of the above, we are unable to apply the earning-based valuation method and hence view the asset-based valuation using the RNAV as the most appropriate valuation methodology to determine the value of Rex shares.
“By adopting the RNAV method of valuation, the material property assets of the Group is revalued to reflect their market value that can be reasonably expected to be realised upon the sale of such assets on a willing-buyer-willing-seller basis.
“”
Based on the RNAV methodology, the estimated value of the entire equity interest in Rex is about RM157.42mil, which translates to RM2.55 per Rex share.
MainStreet said the offer price of RM1.65 was lower than the estimated RNAV per Rex share of RM2.55, representing a discount of 90 sen or 35.29% to the estimated RNAV of Rex share
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