Sunday, September 19

Scientex, Daibochi shares up on voluntary takeover offer

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Daibochi will be able to tap into Scientex’s larger scale of worldwide manufacturing facilities and its broader asset and capital base, thus allowing it to exploit better market opportunities.

KUCHING (September 14): Shares of Scientex Bhd (Scientex) and Daibochi Bhd (Daibochi) went up by 0.44 per cent and 12.55 per cent, respectively, in the early trade on Tuesday, following Scientex’s voluntary takeover offer of Daibochi to take the latter private.

At closing, Scientex’s shares rose by 0.02 sen to RM4.57 with 1.66million shares transacted, while Daibochi’s share price was 30 sen higher at RM2.69 with 8.86 million shares traded.

In a filing with Bursa Malaysia, Scientex announced its proposal to acquire the remaining 124.78 million shares or 38.12 per cent of Daibochi shares not owned by Scientex and 95.8 per cent of the warrants for RM345.3 million.

The company said the acquisition would be funded via a combination of internally generated funds and bank borrowings, with the indicative funding ratio being 50:50.

Scientex, which currently holds 61.88 per cent of Daibochi’s voting shares, said it does not intend to maintain the latter’s listing status.

The team with Kenanga Investment Bank Bhd (Kenanga Research) believed the purpose of Scientex’s proposed privatisation of Daibochi is to gain full control in order to streamline its production and supply chain.

However, it believed that any additional synergies from this exercise will be limited, as any operational synergies between the two companies would have already been realised.

“Based on our back-of-the-envelope calculation, we believe Daibochi’s fair value per share is RM2.60. Thus, in our view, the offer price of RM2.70 is fair, as the four per cent premium is justifiable to gain full control of Daibochi,” it opined.

“Based on the regulatory filings, we assume that Scientex will fund half the privatization with internal generated funds and another half with debt. With the additional bank borrowings of RM172.6 million, we estimate it would lift Scientex’s net gearing to 0.45 times.

“After accounting for the post-tax additional interest expense of RM2.6 million for the privatisation, Scientex’s acquisition of the remainder of Daibochi shares should increase the former’s FY22 core net profit by five per cent from RM456 million to RM479 million as we have included the full year estimate impact.”

MIDF Amanah Investment Bank Bhd (MIDF Research) said the proposed takeover would enable Scientex to have the flexibility and a greater control to streamline the business operations of its subsidiary and the enlarged Scientex group of companies in hopes of an increased efficiency.

“In turn, Daibochi would be able to tap into Scientex’s larger scale of worldwide manufacturing facilities and its broader asset and capital base, thus allowing it to exploit better market opportunities,” it said in a separate report.

“We make no changes to our forward earnings estimates of Daibochi. We revise our target price to RM2.70 per share which is equivalent to the privatisation offer price. We are maintaining our buy call on Daibochi with an expected total return of 14.8 per cent.”