DAFUQ??? RM1.68 only???
My clients are going to kill me as I had told them that this is a good share! This is a real surprise as it come even earlier than RHB Cap!
But after looking at the Offer Doc, I've felt much more relief. This is because its a MGO not a VGO and the offeror is forced to make an offer due to the increment of shareholdings from 32.3% to 36.72% within 6 months and the offeror intended to remain the listing status of the company.
That's mean the offeror is not going to take the company private. Be mindful, even the offeror is not intended to privatize the company at this stage, but things can change rapidly to the situation. How???
As you can see from the last paragraph, the offeror may do something else if they fail to comply the public spread which is at least 10% share floating in the market. If there are less than 10% share spread in the market which also means in the hand of retailers or non major shareholders, then the Bursa Malaysia will suspend the stock.
If thats the case, the company can do lots of thing like invoke the take over where all the remaining shareholders will get the price of RM1.68 or the latest revise price.
Is that the end??? NO!!!
No, I'm sure that is not the end! Tan Sri Ong is a very very smart guy who is also a businessman + Investment Banker! I can say his move on this is well ploted! WHY???
1st, Let's look at the value of OSK. Do you think the OSK worth only RM1.68??? I can assure you that OSK worth much more than that!!!
Without looking at the cash, but just merely looking at the RHB Cap shares that is own by OSK. According to Kenanga Research on Feb 2013, OSK has 245,000,000 shares of RHB Cap.
According to the annual report of 2012, we can see that the total issued shares of OSK is 968,422,919.
245,000,000 divided by 968,422,919 equals to 0.2529
What does this calculation mean?
This proof that every OSK share has 0.2529 shares of RHB Cap share!!!
With the closing price of RHB Cap on 10/07/2013 which is RM8.57. This means the 0.2529 share will worth abour RM2.167 !!!
This is just a simple calculation of the RHB Cap that owned by OSK, and this had ommited the cash as well as other property such as land in Jalan Ampang and some other buildings and also the 16.09 cents dividend that will be pay by RHB Cap soon, this will be around RM39,420,500 CASH!.
So do you think this is fair and reasonable to other shareholders???
I can't wait to see whether what will the Independent Advisor say about this deal. Unfair but reasonable??? It's Unfair and Unreasonable to me!!!
What's the motive?
Obviously, Tan Sri Ong knew the value of the shares of OSK and he thinks that the share price is badly undervalued. According to my calculation of RHB asset, it's a 30% discount by excluding the other assets. This can easily turn out to be 40% by including the other cash and property. So to privatize the company is definitely a good thing to Tan Sri Ong.
1. Why do he place such a low price and saying that he is not intending to privatize the company and maintain the listing status? Was it due to the ruling?
Yes, according to the ruling of bursa. He has to do a Mandatory Take Over Offer.
If its so, is this a good chance for him to own more shares?
The answer is YES!
As U can see in the Condition of offer. The offer will turns to unconditional after Tan Sri has acceptance of more than 50%+1, which means the shareholders who accepted the offer will get money and the shares will belongs to Tan Sri. This means, he had successfully buy more of the very undevalued stock!
How to get 50%+1???
after deducting the shares that own by Tan Sri Ong and PACs now, which is 50% minus 36.72% which means Tan Sri Ong will need another 13.28%+1 shares will turn the offer to unconditional!
As we can see, from the 3 years chart of OSK, the stock has the highest point of RM2.23 on 17/12/2010 which is about 3 years ago. As a result, there are quite a lot of "long term investors" who are not savvy enough who get caught at that time will throw the shares to him or even in the market due to the impatience in them and some of them don't even know that this is a MGO but believing that this deal will certainly go through without realising their rights to reject the offer!!!
Why are they throwing in the market? This has to do with the psychology and the knowledge of the investors! As the offer is just about RM1.68 and the shares had moved up to higher level in the market, hence, the old uncles and aunties will think that this is a good deal rather than RM1.68 and decided to sell it in the market which I think the buyer who moved up the price could possibly be the offeror(not allowed to do so in ruling) or some 3rd party who sees value in the share! On the other hand, some of the investors doesn't know that they are this MGO is just a compulsory act and doesn't mean that this company is going to be private!
Even though Tan Sri can only mop share that is below RM1.68, but don't u think there r some willing buyers who will help him to mop the shares in the market below RM2 and accept Tan Sri's offer? I think that's possible and U have to figure out what am I saying here. Stock market is as dark enough. LOL... On the other hand, Tan Sri is still buying cheap shares as long as the purchase is below RM2.
*Please forgive me for having such a Conspiracy theory but this is share market, anything could happen in share market.
2. As what I had mentioned above, and this stock is badly undervalued and this is not making sense. So other than just buying the shares, will there be any motive behind?
Personally, I think that other than just buying the share, this method is also 1 of the method that to create awareness among the investors that this share is badly undervalued and its definitely a good buy!
This can be proven that everybody was looking at this deal and the newspaper had started to report as well as those analyst are shouting that this is not fair by showing the valuation. Of course, I'm 1 of them that telling you how much do OSK worth and I've been doing this since last year! (This can be proven by some of my clients, I've been telling that OSK is a good buy and the only issue and risk is how long can you wait until it realise its value)
3. This is always the best thing to do. He is trying to PROTECT his assets!
Why? As he is able to grab more shares, hence he will be able to get tighter grip on his company. As long as he can increase his stake to 40%+ or even 50% then its hard for other ppl to steal his company and he can always demand a better price when there are other people wanted to buy up his company!
So getting limelight on OSK and letting people know their value which will causes more demand to the shares and heading to higher share price. Good move isn't it???
SO, will the company being taken private in this MGO???
To me, I think the probability is very low. Why???
1st Scenario (Impossible)
Sri get 90% + 1 of the shares acceptance, this shows that the company had failed to comply with the market share spread. As a result, Tan Sri Ong has 2 ways to choose. 1st, delist the company and he may invoke the offer just like what is happening to Latex now. The only different is that Latex is giving better price and its a VGO. Do u think those top 30 shareholders are nuts? According to the annual report of 2012. there are 22.11% of the shares are in those big player. Do U think they will give it to Tan Sri? So this is almost impossible.
On the other hand, Tan Sri can look for other options such as selling some of the shares he own until its below 90% in order to remain the listing status. But seriously, to get 90% acceptance is really mission impossible.
2nd Scenario (Impossible)
Compulsory take over offer? NO! In order to turn the offer to compulsory, Tan Sri need to get a total acceptance of 90% shares that he hasn't own. As per the announcement, Tan Sri is holding 36.72% which means there are 63.28% are in the hand of public. In order to make it to compulsory take over offer, the 90% of the 63.28% amount which is 56.95% need to accept Tan Sri's offer.
This adds up to 93.67% acceptance. 90% is already ridiculous to me, so do u think its possible to hit 93.67% ??? Hahahahahahaha.....
3rd scenario (High possibility)
In order to make the offer become unconditional, Tan Sri Ong needs 50%+1 where those who accepted will have to surrender their shares to Tan Sri Ong. Such event wouldn't make the offer as compulsory take over offer, but will only let Tan Sri Ong walk away with more shares than he has right now.
As you can see from the announcement in Bursa Malaysia today. They had purchase another 2,000,000 shares (approximately 0.2% which means Tan Sri now had increased his shares holding from 36.72% to 36.92%) at the price of RM1.68 and they will continue to buy if its below RM1.69.
As a result, he is going to benefit from this move.
On the other hand, if he is able to make this deal unconditional then he can extend the offer and also revise the offer price. This will make him own even more shares with a little higher price like RM1.75!
To the shareholders who are reading this, You can stop this from happening by holding on to your shares and do't accept the offer or even selling in the market! This shows that you believe in the value of the shares. U should also ask ur friend who hold this shares to read this blog so he won't sell the shares too! LOL..
4th scenario (Probably but unlikely)
The last scenario is that Tan Sri failed to more than 50% acceptance and make the offer unconditional. As a result, those who accepted the offer will get back the shares instead of RM1.68 cash. In this case, its clear that the shareholder will be the winner of the event while Tan Sri will walk away with nothing but some advisory fee for RHB Investment Bank!
Conclusion
Eventhough Tan Sri Ong were force to make a Mandatory General Offer but he is definitely smart enough and this is definitely a good move by using the ruling! Why?
1. He can own more shares with a cheap price.
2. He may get even more shares by increasing the price a little by little which will also own more shares.
3. If shareholders are not smart enough, throw more shares to him and achieve the 90% mark where he could delist the company then its the best as he will get the share with "cheap cheap price" only.
4. Even he could not take all the shares, but this is definitely 1 of the way to make everyone to aware about how good OSK is and causes the price to move up!
Wow!!! I saw lots of birds being killed with 1 stone only!
Dear Shareholders, how can u defend your asset?
1st. Do not accept the offer!
2nd. Do not sell your shares at this level as this is not the price that the share should be!
3rd. If you still have spare cash, maybe you can buy more of this share. As long as there is no seller, hence the share price will move up gradually.
4th. You can pray that some hero will come out and whallop the shares which just like the case of HLCAP!
5th. Good Luck to you all!
GOOD LUCK and HUAT AH! Disclaimer: No information should be concluded as buy or sell, please consult your personal remisier for your personal investment decision. I will not pay for your losses but I don't mind you to buy me good food if U made money by following my Investment Thoughts. Cheers! Huat ah!
kion11
Good analysis, well thought out
2013-09-15 12:08