YTL Cement falls below YTL Corp offer price in privatisation move

KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to
below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its
privatisation exercise while sentiment was also dented by the overall
cautious market.

At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.

The
FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion
shares valued at RM818.41 million. Declining stocks led advancers 440 to
285 while 267 counters were unchanged.

On Monday, YTL Corp
extended a voluntary share exchange offer to YTL Cement shareholders on
the basis of RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen
each in YTL Corp for every one ordinary share of 50 sen each held in YTL
Cement.

RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.

The
research house said based on current stake held by YTLCorp and its
related parties, the share exchange offer would likely go unconditional
as the hurdle rate is just to achieve a more than 50% stake in YTL
Cement.

'We believe some minority shareholders might take this
opportunity to exit due to the low liquidity issues of YTL Cement
shares. At the reference price of RM4.50, YTL Cement is valued at about
6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current
valuation of about 8.5 times EV/EBITDA.

'We do note that
minority shareholders will receive the more liquid YTL Corp shares,
which then provides the more attractive exit route,' it said.

RHB
Research said its indicative fair value remained at RM4.75 based on 10
times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple
discount to its one-year forward target PER for the cement sub-sector to
reflect YTL Cement's relatively low share liquidity.

'Due to the
recent run-up in share price and limited upside to our fair value, we
hence downgrade our recommendation on YTL Cement to Market Perform. In
the near term, we believe share price of YTL Cement is more likely to
track YTL Corp's share price due to this proposed share exchange offer.
At current YTL Corp's share price of RM1.54, YTL Cement is effectively
valued at RM4.88 based on the terms of the proposed share exchange
offer,' it said.