KFC Holdings (M) Bhd (Dec 30, RM3.84)
Maintain trading buy at RM3.77 with fair value of RM4: The Malay Chamber of Commerce Malaysia (MCCM) said last Thursday that it would make a counter offer for Kulim’s 54% stake in QSR Brands Bhd to ensure the profitable fast food business remains in the hands of bumiputra. It plans to offer to buy QSR shares at RM6.90 per share which is 10 sen higher than Massive Equity Sdn Bhd’s (MESB) offer of RM6.80 per share.
We understand that the chamber would seek funding from various bumiputra-linked funds such as Lembaga Tabung Haji, Felda Holdings Bhd, Amanah Saham Mara, and Permodalan Nasional Bhd. Note that the chamber has yet to officially approach these organisations and would do it sooner or later. In addition, we expect MCCM to approach the various funds which are shareholders of QSR. Unlike KFCH, which has a substantial minority shareholder i.e. Tabung Haji at 22%, QSR’s shareholding structure is very fragmented, with EPF owning about 5% of the company and a myriad of other funds each holding 1%-2%.
MCCM’s offer of RM6.90/share would not have any impact on KFCH shares as it is purchasing QSR’s shares from Kulim. Recall that MESB’s offer is to purchase the assets and liabilities of both KFCH and QSR at RM4/share and RM6.80/share respectively. After the disposal to MESB, both KFCH and QSR would be shell companies with cash, which would be distributed to the respective shareholders.
On the flipside, MCCM’s offer for QSR shares which are owned by Kulim would result in a change of major shareholder. We believe MCCM could do a general offer for the remainder of QSR shares that it does not own, post-acquisition, although we believe this is unlikely as MCCM stated in the media that its planned offer would only cost them RM1 billion, which is the value of Kulim’s 54% stake in QSR at RM6.90/share.
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.
We believe the MCCM’s offer is not likely to go through as both KFCH and QSR boards had already stated that they will not consider any other offers.
Furthermore, MCCM’s offer to purchase the stake in QSR would require the approval of Kulim’s shareholders, of which JCorp is the majority. We reiterate our “trading buy” call on the stock with an unchanged fair value of RM4/share, which represents MESB’s offer for the assets and liabilities of KFCH. — RHB Research, Dec 30
This article appeared in The Edge Financial Daily, January 3, 2012.
Maintain trading buy at RM3.77 with fair value of RM4: The Malay Chamber of Commerce Malaysia (MCCM) said last Thursday that it would make a counter offer for Kulim’s 54% stake in QSR Brands Bhd to ensure the profitable fast food business remains in the hands of bumiputra. It plans to offer to buy QSR shares at RM6.90 per share which is 10 sen higher than Massive Equity Sdn Bhd’s (MESB) offer of RM6.80 per share.
We understand that the chamber would seek funding from various bumiputra-linked funds such as Lembaga Tabung Haji, Felda Holdings Bhd, Amanah Saham Mara, and Permodalan Nasional Bhd. Note that the chamber has yet to officially approach these organisations and would do it sooner or later. In addition, we expect MCCM to approach the various funds which are shareholders of QSR. Unlike KFCH, which has a substantial minority shareholder i.e. Tabung Haji at 22%, QSR’s shareholding structure is very fragmented, with EPF owning about 5% of the company and a myriad of other funds each holding 1%-2%.
MCCM’s offer of RM6.90/share would not have any impact on KFCH shares as it is purchasing QSR’s shares from Kulim. Recall that MESB’s offer is to purchase the assets and liabilities of both KFCH and QSR at RM4/share and RM6.80/share respectively. After the disposal to MESB, both KFCH and QSR would be shell companies with cash, which would be distributed to the respective shareholders.
On the flipside, MCCM’s offer for QSR shares which are owned by Kulim would result in a change of major shareholder. We believe MCCM could do a general offer for the remainder of QSR shares that it does not own, post-acquisition, although we believe this is unlikely as MCCM stated in the media that its planned offer would only cost them RM1 billion, which is the value of Kulim’s 54% stake in QSR at RM6.90/share.
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.
We believe the MCCM’s offer is not likely to go through as both KFCH and QSR boards had already stated that they will not consider any other offers.
Furthermore, MCCM’s offer to purchase the stake in QSR would require the approval of Kulim’s shareholders, of which JCorp is the majority. We reiterate our “trading buy” call on the stock with an unchanged fair value of RM4/share, which represents MESB’s offer for the assets and liabilities of KFCH. — RHB Research, Dec 30
This article appeared in The Edge Financial Daily, January 3, 2012.
