Will billionaire Robert Quek also raise bid for Hong Leong Capital?

PETALING JAYA: With Tan Sri Quek Leng Chan (pic) upping his takeover bid by 13.6% for Hong Kong-listed Guoco Group Ltd
to HK$100 per share from a previous HK$88 per share offer, market
observers now wonder whether Quek will also up the bid for his Malaysian
investment banking unit, Hong Leong Capital Bhd (HLCap).
Since Quek, via Hong Leong Financial Group Bhd (HLFG)
first made its intentions known to privatise its 79.09% subsidiary
HLCap at RM1.71, shares of HLCap have been steadily rallying and
continue to overshoot the privatisation offer price.
Quek first made the offer for Guoco on Dec 12, 2012, while he made the offer on HLCap about a month later, on Jan 14, 2013.
One
notable difference in the trading values of these two target companies
is that Guoco's share price continues to be at a 31% discount to its net
asset value of HK$132.62, while HLCap's share price is 152% above its
net asset value of RM1.80.
HLCap closed yesterday at RM4.55, lifting the stock to 2.5 times its book value.
HLCap is now up 220% on a year to date basis, a level not seen since March 2000.
Nonetheless,
with Quek upping his offer for Hong Kong listed Guoco, some dealers are
now hopeful that Quek could do the same for HLCap.
However, dealers cautioned that the raised offer price might not be at current lofty levels of HLCap's share price.
“Quek will very unlikely make an offer higher than HLCap's current share price,” remarked one banking analyst.
She
added though, that it was possible for Quek to eventually up his offer
for HLCap somewhere down the line. Her bet is that the revised offer
will not be more than 2 times the book value of HLCap. At 2 times book
value, HLCap would be valued at RM3.60.
“So far, the maximum
valuation I have seen, is around the 1.9 times level,” she said, citing
as examples, the OSK-RHB and Maybank-Kim Eng mergers.
RHB Capital paid 1.77 times book value for OSK Investment Bank, while Malayan Banking Bhd paid 1.9 times book value for Kim Eng. It is notable too, that both OSK and Kim Eng Holdings Ltd are regional players, while HLCap's business is mostly local.
Nonetheless,
based on takeover rules, any revised offer can only take place in 12
months' time. Thus it is on this note that one banking analyst remarked
that the waiting period of 12 months just made the scenario very
unexciting.
“Anything can happen in 12 months. However, I won't
be surprised if Quek ups his offer. HLCap is expected to announce better
financial results moving forward. The absolute amount for the
privatisation offer is not that much. Even at 2.5 times price to book
value, Quek would need to fork out less than RM200mil,” said this
banking analyst.
When HLFG launched the conditional voluntary
takeover offer, the RM1.71 translated to about RM67mil, based on its
then stake of 79.09% stake.
The banking analyst, however,
conceded that anything could happen in the next 12 months, and it was
too premature to make any guesses at this juncture.
Recall that
as of Feb 25, which was the closing date of the offer by HLFG to buy all
the shares of HLCap, HLFG held 81.33% in HLCap.
It was a victory for minority shareholders, with HLFG receiving a mere 2.24% in acceptances as of Feb 25.
Throwing a spanner in the works was one Datuk Dr Yu Kuan Chon, who accumulated some 8.6% or 21.3 million shares. Yu is the chairman and executive director of Perak-based YNH Property Bhd
In
the case of Guoco, the 13.6% higher offer now values Guoco at
HK$9.37bil from HK$8.25bil earlier. The offer price of HK$100 is an 8.2%
premium over the stock's last price of HK$91.85. The bid would not be
increased, Guoco said in a filing with the Hong Kong stock exchange.