PETALING JAYA: Independent ad-viser Hong Leong Investment Bank (HLIB) considers the offer price of RM1.05 per share for Ogawa World Bhd as “reasonable”, duly recommending that Ogawa shareholders accept the offer.
In its independent advice released on Bursa Malaysia yesterday, HLIB noted that the offer price of RM1.05 was below the fair valuation range and represented a discount of between 5.40% and 52.49% of the minimum fair value of RM1.11 and the maximum fair value of RM2.21, respectively.
To recap, Ogawa had received a voluntary conditional takeover offer from Comfort Enterprise (Hong Kong) Co Ltd at RM1.05 cash per share in early September. Comfort Enterprise is a wholly-owned subsidiary of Shenzen-listed Xiamen Comfort Science & Technology Group Co Ltd.
“Ogawa does not have a fixed dividend policy and had only declared dividends to shareholders for two of the past five financial years,” HLIB said. It also noted that as the company’s five-year dividend yield of 3.33% was lower than the average 3.96% of the FTSE Bursa Malaysia KL Composite Index, the offer represented an exit opportunity for the shareholders who wished to realise their investment.
HLIB said the cash proceeds could be reinvested in other types of investments, which might generate a higher return.
As for the share price performance, HLIB noted that it had been trading below the offer price of RM1.05 for the past three years up to Sept 6, 2013.
“The offer price represents a premium of 0.96% and 22.09% to the last traded price on Oct 3 and Sept 6, respectively,” it said.
Also, with the irrevocable undertakings given by the undertaking shareholders to accept the company upon the offer being accepted, the offeror would be able to pass resolutions on matters that require shareholders’ approval via an ordinary resolution.
“As the offeror does not intend to maintain the listing status of Ogawa, there is also a possibility that the shareholders may hold non-marketable shares, assuming the offeror receives at least 75% of the offer shares, as the offeror would then procure Ogawa to undertake the necessary steps to withdraw its listing status.”
Ogawa has not received any competing offer to date.
It said several shareholders who owned 53.9% of Ogawa, or 64.62 million shares, had given their irrevocable undertakings to Xiamen to accept the offer.