TEB shareholders unlikely to accept Censof’s offer

by **Cals** Wed 16 Oct 2013, 13:44

Business & Markets 2013

Written by Shalini Kumar of theedgemalaysia.com

Wednesday, 16 October 2013 09:42

KUALA LUMPUR: Last Friday Censof Holdings Bhd said it had completed its purchase of a 20.8% stake in Time Engineering Bhd (TEB) from Khazanah Nasional Bhd for RM35.79 million. This was the first tranche of the 45.03% equity interest in TEB that Censof will buy from Khazanah.

In September 2012, Censof entered into a conditional sale and purchase agreement with Khazanah to acquire 45.03% or 349.11 million shares of 20 sen each for a cash consideration of approximately RM69.82 million.

The remaining equity interest is to be acquired at later stages, causing Censof to undertake a mandatory general offer (MGO) for the rest of the shares in TEB that it does not own.

However, analysts feel that it is unlikely for TEB shareholders to accept Censof’s offer at 20 sen apiece, as it was too low compared with the current share price of 27 sen.

“Management does not intend to delist the company anyway. The reason for the MGO is a technical one since it crossed the trigger threshold of 33.3%,” said an analyst from Kenanga Research.

Since it has crossed the threshold, Censof was obliged to extend a conditional MGO, with the conditional acceptance of more than 50% of the total voting shares of TEB.

The Kenanga analyst also said Censof’s entry as a majority shareholder in TEB would help turnaround the IT company’s prospects.

“TEB used to be a good company for investors, but as a result of leakages in finances and resources, it declined in value. With Censof’s entry, synergy is created when both companies mutually benefit from the software solutions they have,” he said.

“Being the majority shareholder of TEB, Censof intends to introduce some key directors to lead TEB’s board in order to materialise greater strategic benefits on the ‘combined’ assets and resources between both parties,” said Kenanga Research in a note on Monday.

Censof’s Max-Paygate system could complement TEB’s 71.2% owned Dagang Net Technologies (Dagang Net) and leverage on the latter’s customer base of over 13,000 to market and sell its solutions, resulting in enhanced earnings margins and minimised cost leakages to third parties in the future.

Dagang Net develops, manages and provides e-commerce and computerised transaction services, while Max-Paygate offers GST payment services.

Dagang Net was awarded a five-year government contract to operate an electronic customs declaration value-added network and electronic permits for various government agencies in 2004. The company managed to secure a five-year extension in 2009 which will expire next year.

“While there is a slight risk that Dagang Net may not be able to renew its exclusive concession with Royal Malaysia Customs upon its expiration in 2014, it should be business as usual since it possesses a strong clientele base and currently has tougher entry barrier for new entrants,” said Kenanga in its note.

This article first appeared in The Edge Financial Daily, on October 16, 2013.