KUALA LUMPUR: COCOALAND HOLDINGS BHD said First Pacific Company Ltd withdrew its plan to buy all its business and undertaking as its product range did not meet the Hong Kong-listed company’s overall regional food expansion plans.
The snacks and candy manufacturer said on Tuesday First Pacific’s detailed review showed the strategic benefits to the latter’s overall regional food expansion plans “is significantly less than First Pacific had initially envisaged”.
Cocoaland was responding to a query from Bursa Malaysia Securities about First Pacific’s plan not to go ahead and buy up Cocoaland.
The regulator had also sought further clarification pertaining to Cocoaland’s statement on “strategic fit offered by Cocoaland differs from what First Pacific had envisaged”.
On Monday, Cocoaland’s shares tumbled 15.4% or 37 sen to end the day at RM2.03 after the announcement.
However, its share price recovered slightly on Tuesday to end 11 sen higher at RM2.14.
To recap, First Pacific, controlled by Indonesian tycoon Anthony Salim of the Salim Group, first announced its intention to buy the business of the snack and candy manufacturer on June 2 at a price that had worked out to RM2.70 per Cocoaland share.
First Pacific had said that its buyout was subject to a due diligence exercise.
StarBiz reported on Tuesday that Cocoaland founder and executive director Liew Fook Meng declined to comment.
“I think it’s better you ask First Pacific. It is for them to state their reasons, not us,” said Liew.
Liew, however, appeared unperturbed and said First Pacific’s withdrawal was part and parcel of looking for a suitable buyer for Cocoaland.
Cocoaland is controlled by Leverage Success Sdn Bhd, which owns a 38% stake in the company. The shareholders of Leverage Success comprise the seven Liew brothers.
For the financial year ended Dec 31, 2014 (FY14), Cocoaland recorded a net profit of RM21.9mil on the back of RM260.8mil revenue. Using this net profit, First Prime’s RM463.3mil offer would translate to a price earnings (PE) ratio of some 21 times.
AmResearch, which is the sole research house covering the stock, has a profit forecast of RM25.3mil for FY15. Using this profit forecast, First Pacific’s offer was valued at a forward PE ratio of 18.31 times.
As of the first quarter to March 31, 2015, Cocoaland’s net profit was up 134.7% to RM8.01mil on the back of a 14.32% increase in revenue to RM67.74mil.
At Cocoaland’s Monday price of RM2.03, the stock is trading at a trailing PE ratio of 13.32 times and a forward PE of 13.6 times.
AmResearch’s target price of RM2.35 is based on a 2015 PE ratio of 16 times based on its estimated net earnings of RM25.3mil.