Toyota Tsusho ‘offer’ a welcome surprise

by **Cals** Wed 12 Mar 2014, 08:25

[size=33]Toyota Tsusho ‘offer’ a welcome surprise[/size]

Posted on 12 March 2014 - 05:37am

Ee Ann Nee
[You must be registered and logged in to see this link.]

[size=14]PETALING JAYA: The manner in which Toyota Tsusho Corp (TTC) used publicly available information to make a tentative maximum price per share offer of RM3.74 for a 51% stake in Kian Joo Can Factory Bhd's shares is deemed "unusual" but the offer, which is closer to a more palatable valuation of Kian Joo, is a "welcome surprise".

Yesterday Kian Joo announced that it had received a letter of interest from TTC for a possible purchase of a 51% stake in aluminium and tin can packaging company Kian Joo. Kian Joo is already the target of a takeover offer by Aspire Insight Sdn Bhd.

Public Invest Research analyst Ching Weng Jin told SunBiz TTC's methodology in valuing Kian Joo is unusual but it is not unusual for TTC to make a competing offer.

"It's unusual in the sense that it was done through reviewing publicly available information. TTC studied the company (Kian Joo) and did their own valuation and came up with the price. Subject to satisfactory due diligence undertaken, they can revise the price if they want to," he said yesterday.

TTC's offer values Kian Joo at RM1.7 billion while the current offer on the table by Aspire Insight Sdn Bhd at RM3.30 per share values it at RM1.5 billion. Kian Joo's shares surged 6% or 20 sen to RM3.41 yesterday with some 2.3 million shares traded on news of the offer.

On Nov 26 last year, Aspire Insight, jointly-owned by the Employees Provident Fund and Kian Joo executive director Freddie Chee Khay Leong offered to acquire all of Kian Joo's assets and liabilities for RM1.5 billion in cash. It has until Friday to complete its due diligence exercise and sign definitive agreements in relation to this offer.

"This is certainly a welcome surprise, though extremely preliminary in nature, and values the company higher than the current offer on the table by Aspire Insight and closer to what we have always deemed a more palatable valuation of the company (in the range of RM3.50 to RM3.70)," Ching said in his report.

The offer is valid for 10 calendar days from the date of its letter to Kian Joo (until March 17, 2014). TTC is the trading arm of the Toyota Group and has a history dating back to 1948.

"Considering its pedigree, financing of this cash-based transaction, should it materialise, will not be an issue," Ching said.

Traditionally automotive-related, TTC has diversified into new business areas like infrastructure, chemicals, food, aquaculture and overseas hotel management amongst others, spanning a global network of more than 60 countries. TTC's non-binding interest will be undertaken with a yet-to-be identified possible partner.

"However, even when TTC wants to buy 51%, who is going to sell them 51%? Note that three of Kian Joo's major shareholders own 49.2% of the company.

"Our outperform call is retained, now more fervently than before on account of a potential tussle for the company, with an unchanged target price of RM3.52. A rollover to FY15's earnings will see a fair value of RM3.71 per share on similar multiples, closer to this surprise RM3.74 expression of interest," he added.

"It is now left to be seen if an extension will be sought in light of this recent development, to facilitate a higher competing offer perhaps. Or will Can-One Bhd (substantial shareholder) and EPF opt to cash out?"
[/size]