KUALA LUMPUR: Can-One Bhd finally got hold of 32.9% equity interest, or 146.1 million shares, in Kian Joo Can Factory Bhd (KJCF) from the See family via an off-market trade yesterday.
The news should lay to rest any remaining uncertainty over Can-One’s acquisition of the stake in KJCF at RM1.65 per share, which is at a 25.6% discount to yesterday’s closing price of RM2.22.
In fact, Can-One’s share price climbed further yesterday, setting a record high of RM2.17. Some 6.9 million shares changed hands on the open market.
It has been two weeks since the Federal Court ruled in favour of Can-One’s takeover of the See family’s 32.9% stake in KJCF.
The delay to the block of shares changing hands had raised uncertainty about whether Can-One was facing hurdles on the share purchase after a three-year tussle in the courtroom.
To recap, Can-One won the bid for its largest competitor, KJCF, three years ago at RM1.65 per share but the See family waged a legal battle to reject the share disposal.
Today, KJCF has net assets per share of RM1.96 and it is valued at 1.13 times book value based on yesterday’s closing of RM2.22.
As such, Can-One is buying KJCF at a discount of 0.84 times book value. Can-One only has to pay RM241 million for the KJCF block that is worth RM324.3 million based on yesterday’s closing price. This gives Can-One a paper gain of about RM83.3 million.
KJCF has a string of real estate assets in Malaysia and Vietnam with a total net book value of RM340.98 million, according to the company’s latest annual report.
With KJCF shares in hand, Can-One will no longer have to contemplate the See family’s potential “poison pill” of a rights issue.
The rights issue was announced in February 2011 and would have diluted the block of shares substantially if the See family decides not to subscribe to the cash call before selling to Can-One.
An analyst noted that Can-One’s acquisition will translate into better margins. Combined, both players will be able to command better prices as well as leverage their combined size for better prices from suppliers.
Analysts also said Can-One is getting a bargain as KJCF has a stable earnings track record, having expanded its production capacity in Malaysia and Vietnam. It also has improved future earnings prospects as it ventures into Indonesia.
As things stand, KJCF looks poised for a record year of profits.
TA Research forecasts KJCF’s FY11 net profit to rise to RM116.8 million, up 14.5% from RM101.98 million for FY10. Net profit for FY12 is expected to be RM143 million.
In line with that expectation, Kenanga Research forecasts KJCF’s net profit for FY11 to grow 10.6% year-on-year to RM112.8 million and hit RM132 million for FY12. Kenanga maintained its target price of RM2.38 with a “market perform” call on the counter.
Funding to acquire KJCF would not have been difficult to secure, as Can-One has bought an income-generating asset at a discount.
On the other hand, Can-One’s relatively weak cash position of RM11.85 million compared with its debt obligation of RM226.04 million may be a problem moving forward. Concern has been raised that the high gearing might prove challenging, particularly if Can-One should require additional funding at a later date.
The news should lay to rest any remaining uncertainty over Can-One’s acquisition of the stake in KJCF at RM1.65 per share, which is at a 25.6% discount to yesterday’s closing price of RM2.22.
In fact, Can-One’s share price climbed further yesterday, setting a record high of RM2.17. Some 6.9 million shares changed hands on the open market.
It has been two weeks since the Federal Court ruled in favour of Can-One’s takeover of the See family’s 32.9% stake in KJCF.
The delay to the block of shares changing hands had raised uncertainty about whether Can-One was facing hurdles on the share purchase after a three-year tussle in the courtroom.
To recap, Can-One won the bid for its largest competitor, KJCF, three years ago at RM1.65 per share but the See family waged a legal battle to reject the share disposal.
Today, KJCF has net assets per share of RM1.96 and it is valued at 1.13 times book value based on yesterday’s closing of RM2.22.
As such, Can-One is buying KJCF at a discount of 0.84 times book value. Can-One only has to pay RM241 million for the KJCF block that is worth RM324.3 million based on yesterday’s closing price. This gives Can-One a paper gain of about RM83.3 million.
KJCF has a string of real estate assets in Malaysia and Vietnam with a total net book value of RM340.98 million, according to the company’s latest annual report.
With KJCF shares in hand, Can-One will no longer have to contemplate the See family’s potential “poison pill” of a rights issue.
The rights issue was announced in February 2011 and would have diluted the block of shares substantially if the See family decides not to subscribe to the cash call before selling to Can-One.
An analyst noted that Can-One’s acquisition will translate into better margins. Combined, both players will be able to command better prices as well as leverage their combined size for better prices from suppliers.
Analysts also said Can-One is getting a bargain as KJCF has a stable earnings track record, having expanded its production capacity in Malaysia and Vietnam. It also has improved future earnings prospects as it ventures into Indonesia.
As things stand, KJCF looks poised for a record year of profits.
TA Research forecasts KJCF’s FY11 net profit to rise to RM116.8 million, up 14.5% from RM101.98 million for FY10. Net profit for FY12 is expected to be RM143 million.
In line with that expectation, Kenanga Research forecasts KJCF’s net profit for FY11 to grow 10.6% year-on-year to RM112.8 million and hit RM132 million for FY12. Kenanga maintained its target price of RM2.38 with a “market perform” call on the counter.
Funding to acquire KJCF would not have been difficult to secure, as Can-One has bought an income-generating asset at a discount.
On the other hand, Can-One’s relatively weak cash position of RM11.85 million compared with its debt obligation of RM226.04 million may be a problem moving forward. Concern has been raised that the high gearing might prove challenging, particularly if Can-One should require additional funding at a later date.
