Quick take: Lafarge surges to 13 month high of RM4.25

YTL Corp subsidiary YTL Cement

KUALA LUMPUR: Shares of cement maker  Lafarge Malaysia Bhd surged to a high of RM4.25, the highest since May last year despite AmInvestment Bank's advice that minority shareholders reject YTL Group's takeover offer of RM3.75 a share.

At 11.21am, Lafarge was up 47 sen to RM4.25 with 586,900 shares done.

The FBM KLCI fell 9.05 points or 0.55% to 1,641.69. Turnover was 860.71 million shares valued at RM603.17mil. There were 240 gainers, 345 losers and 315 counters unchanged.

However, what has attracted interest is that more than 1,000 firms are vying for a share of the 40% civil works portion of the East Coast Rail Link (ECRL).

A total of 1,321 local firms have submitted their interest over the course of the pre-qualification exercise held on May 29 and 30, for a share of the civil works portion of the RM44bil mega project.

On June 3,  AmInvest Bank had in its independent advice said the offer price was lower than and represented a discount from 2.2% to 18.5% over the range of fair values of RM3.83 and RM4.60 per share based on the sum-of-parts valuation.

It said this method primarily based on the discounted cashflow valuation after taking into consideration of the revival/ resumption and on-going review of large infrastructure projects.

AmInvest Bank also said the takeover would see the emergence of the enlarged YTL Cement Group as a clear market leader with capacity share of about 63% in Peninsular Malaysia which may potentially increase the demand and average selling price of cement (currently at the lowest level since last 10 years).

It also said one of the main reasons for the current low market price of Lafarge shares which has been trading below the offer price since May 2018 due to the suspension announcements. 

“Hence, the implementation of large infrastructure projects and/or fruitful initiative of the Malaysian government in promoting affordable housing may potentially increase cement demand and contribute positively to the financial results of Lafarge Malaysia Group and share price movement of Lafarge shares,” it said.

It also said the offer is “not reasonable” as it is the intention of YTL Cement to maintain the listing status of Lafarge on the Main Market of Bursa Securities and keep the shares traded on Bursa Securities unless YTL Cement either individually or jointly with its associates hold in aggregate 90% or more of the Lafarge shares and Lafarge does not comply with the public spread requirement.

Meanwhile, KAF Seagroatt & Campbell had on June 10 said minority shareholders should accept the offer but DBS Bank said they should reject the offer while CIMB Research had a hold.

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