"We opine that there is limited upside gain in the near-term while the 1.9% dividend yield is unappealing," said the research house in a Tuesday note.
"The offer price of RM1.59 is close to our TP of RM1.60 which was derived based on DDM model (terminal growth of 3.2%)."
MIDF added that synergistic benefits through the merget with Scientex will take some time to materialise.
The research house also noted that Daibochi's FY18 earnings fell short despite revenue jumping 10.8%, due to higher raw material costs, slower cost pass through, unfavourable forex trend and higher operating cost.
"While we expect FY19F profit to improve, we think that its profit margin may not recover to FY17 level due to product mix and elevated opex in the near-term," it said.
To recap, Scientex had on March 4 issued an offer document to take over shares in Daibochi the former does not already own.
The offer includes a share swap that prices one Scientex share at RM8.80 or 5.535 Daibochi shares in exchange for one Scientex share.
Scientex intends to continue Daibochi's existing business and will review its strategy and business direction from time to time, without introducing any major cahnges except to integrate, reorganise or rationalise the business activities where necessary.
Daibochi's top and mid management have agreed to stay on to carry out the day-to-day operations of the company.
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