KFC Holdings (M) Bhd (Jan 5, RM3.80)
Maintain trading buy at RM3.82 with fair value of RM4: We attended a discussion with JCorp’s management on Wednesday regarding the proposed acquisition of the assets and liabilities of KFCH and QSR.
The key points of the discussion are as follows. We understand that Massive Equity Sdn Bhd, the special purpose vehicle (SPV) involved in the exercise is now in the process of due diligence for both KFCH and QSR.
The process is expected to take a few more weeks and is slated to be completed by early February, barring any unforeseen circumstances. After the due diligence process, the sale and purchase agreement is expected to be signed followed by an offer letter to the shareholders of KFCH and QSR.
An EGM will be held 21 days after letters to shareholders have been sent out. Assuming minority shareholders accept the offer by JCorp, we expect the deal to be completed in April or May and the capital repayment to be paid before the end of 1H12.
Regarding the potential counter offer by the Malay Chamber of Commerce Malaysia (MCCM), JCorp stated that they had not received any official offer from the party. Furthermore, the decision will be up to JCorp to either accept the offer or reject it, and JCorp is not interested in any other offers.
We had already highlighted this in our note dated Dec 30, 2011 when the MCCM announced its offer to the media last week. Note that Johor Mentri Besar Datuk Abdul Ghani Osman highlighted the same thing in his interview with Bernama yesterday.
No change to our forecasts Risks.
1) Bird/swine flu escalation;
2) escalation of corn and soyabean prices, which would eat into margins; and
3) deteriorating consumer spending power, resulting in lower same-store sales (SSS) growth.
Our fair value remains unchanged at RM4/share, based on JCorp’s offer for the assets and liabilities of KFCH, and we reiterate our “trading buy” call. We believe the next hurdle for the completion of the deal is the minority shareholders’ vote, which we are optimistic will go through as we believe the offer price by JCorp is fair. — RHB Research, Jan 5
Maintain trading buy at RM3.82 with fair value of RM4: We attended a discussion with JCorp’s management on Wednesday regarding the proposed acquisition of the assets and liabilities of KFCH and QSR.
The key points of the discussion are as follows. We understand that Massive Equity Sdn Bhd, the special purpose vehicle (SPV) involved in the exercise is now in the process of due diligence for both KFCH and QSR.
The process is expected to take a few more weeks and is slated to be completed by early February, barring any unforeseen circumstances. After the due diligence process, the sale and purchase agreement is expected to be signed followed by an offer letter to the shareholders of KFCH and QSR.
An EGM will be held 21 days after letters to shareholders have been sent out. Assuming minority shareholders accept the offer by JCorp, we expect the deal to be completed in April or May and the capital repayment to be paid before the end of 1H12.
Regarding the potential counter offer by the Malay Chamber of Commerce Malaysia (MCCM), JCorp stated that they had not received any official offer from the party. Furthermore, the decision will be up to JCorp to either accept the offer or reject it, and JCorp is not interested in any other offers.
RHB Research optimistic minority shareholders of KFCH will approve the deal as they believe the offer by JCorp is fair.
We had already highlighted this in our note dated Dec 30, 2011 when the MCCM announced its offer to the media last week. Note that Johor Mentri Besar Datuk Abdul Ghani Osman highlighted the same thing in his interview with Bernama yesterday.
No change to our forecasts Risks.
1) Bird/swine flu escalation;
2) escalation of corn and soyabean prices, which would eat into margins; and
3) deteriorating consumer spending power, resulting in lower same-store sales (SSS) growth.
Our fair value remains unchanged at RM4/share, based on JCorp’s offer for the assets and liabilities of KFCH, and we reiterate our “trading buy” call. We believe the next hurdle for the completion of the deal is the minority shareholders’ vote, which we are optimistic will go through as we believe the offer price by JCorp is fair. — RHB Research, Jan 5
