KUALA LUMPUR (March 19): Shares of EP MANUFACTURING BHD [] (EPMB) fell 12.5% by noon on Monday as investors viewed its proposed acquisition of the 26km Maju Expressway (MEX) from Maju Holdings Sdn Bhd as pricey.
At midday, EPMB was down 14 sen to 98 sen.
Under the deal, the auto parts maker will pay RM1.7 billion for the highway concessionaire, according to sources. The RM1.7 billion price tag includes debts. The MEX links the city centre in Jalan Tun Razak here to Putrajaya.
The Edge Financial Daily said a EPMB would finance the acquisition by issuing RM1.2 billion in sukuk while the remaining amount will be raised through bank borrowings.
OSK Research said the acquisition at RM1.7 billion would include assuming debts totaling RM550 million.
“Although traffic growth is expected to be resilient, from a valuation standpoint, the deal looks pricey and raises our concern that it may cause EPMB’s net gearing to to 457% this year.
“Besides, the high interest cost will erode earnings in the immediate term. Given its excellent run but this pricey acquisition, we downgrade EPMB to a NEUTRAL from a BUY, slashing our fair value from RM1.38 to RM1.15,” it said.
At midday, EPMB was down 14 sen to 98 sen.
Under the deal, the auto parts maker will pay RM1.7 billion for the highway concessionaire, according to sources. The RM1.7 billion price tag includes debts. The MEX links the city centre in Jalan Tun Razak here to Putrajaya.
The Edge Financial Daily said a EPMB would finance the acquisition by issuing RM1.2 billion in sukuk while the remaining amount will be raised through bank borrowings.
OSK Research said the acquisition at RM1.7 billion would include assuming debts totaling RM550 million.
“Although traffic growth is expected to be resilient, from a valuation standpoint, the deal looks pricey and raises our concern that it may cause EPMB’s net gearing to to 457% this year.
“Besides, the high interest cost will erode earnings in the immediate term. Given its excellent run but this pricey acquisition, we downgrade EPMB to a NEUTRAL from a BUY, slashing our fair value from RM1.38 to RM1.15,” it said.
