KUALA LUMPUR (March 14): UOBKayHian has described Scientex Bhd’s mandatory takeover of Daibochi Bhd’s warrant option as unfair and unreasonable.

According to circular issued via a bourse filing today, the firm said of the three methods presented to compensate existing Daibochi shareholders, Scientex’s warrants offer was unfair and unreasonable on the grounds of a discounted offer price and low liquidity.

UOBKayHian said Scientex’s offer price aimed at Daibochi warrant holders is substantially lower than the latter’s closing prices — constituting a discount ranging from 91.7% to 97.9% to the historical closing prices of the warrants. It further added that the offer price represents a significant discount of 91.7% to the theoretical value of the offer warrants at 12 sen.

“Notwithstanding the low liquidity turnover of the Warrants of 0.35%, as compared to the liquidity turnover of its comparable companies of 4.91% and the absence of a competing offer. 

"The Warrant Holders can continue to hold their Offer Warrants (which expires on June 19, 2022) and sell their Offer Warrants in the open market at a higher price as compared to the Warrant Offer Price, given that it is the intention of the Offeror to maintain the listing status of Daibochi on the Main Market of Bursa Securities,” UOBKayHian said.

It added that the warrants' low liquidity turnover may take a longer time to be fully realised in terms of investment value, and that warrant holders should sell their warrants on the open market at a higher price if they want to do so.

However, UOBKayHian said the cash and share exchange options were both fair and reasonable.

This as the cash option is within a fair value range of between RM1.52 to RM1.73, as well as being above the closing price and the five-day volume weighted average price (VWAP) for the counter.

The share exchange offer is also considered fair and reasonable on the basis that it would allow Daibochi shareholders the opportunity to trade Scientex shares that are from Daibochi's range of RM1.65 to RM1.90,  to Scientex's worth between RM9.15 to RM10.50. Furthermore, UOBKayHian deems Scientex shares as “relatively more liquid”, as Scientex shares have a liquidity turnover of 2.26%.

At the afternoon market close today, shares of Daibochi closed unchanged at RM1.58 with 350,700 shares exchanging hands — giving the group a market capitalisation of RM518.08 million.

Meanwhile, Scientex dipped 0.59% or 5 sen to RM8.35, with 63,300 shares done.