Dayang has war chest of RM194 million

by **Cals** Sat 16 May 2015, 02:40

Dayang has war chest of RM194 million

Dayang Enterprise Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard)
(May 13, RM2.64)
Maintain hold with unchanged target price (TP) RM2.85: Dayang Enterprise Holdings and Perdana Petroleum Bhd([You must be registered and logged in to see this image.] Financial Dashboard) requested their shares to be suspended from trading on Thursday, pending the announcement of a material corporate transaction.
We believe this to be a take-over offer from Dayang, which has already been widely known in the market, as Dayang has built up its stake in Perdana to 29.88% as at end-March 2015.
Dayang, after completing a cash call last year, has a war chest of RM194 million and therefore has room to take on debt funding for a takeover with its net cash position.
The remaining stake in Perdana, at Wednesday’s close, is worth RM787 million. That said, being a fairly conservative company which has never opted to stretch its balance sheet, we think that an exercise involving a share swap may materialise instead.
After all, Perdana is quite highly geared at close to one times, with net debt of RM637 million. With a share swap, the enlarged joint entity could still have a fairly clean balance sheet, consistent with Dayang’s general financial management philosophy.
We maintain our TP on Dayang at RM2.85 (13 times financial year 2016 forecast, ahead of the impending announcement.
In our view, this news is already priced in, as Dayang’s share price has trended downwards in the past two trading days. — AllianceDBS Research, May 14
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This article first appeared in The Edge Financial Daily, on May 15, 2015