KUALA LUMPUR: Tenaga Nasional Bhd’s (TNB) offer of RM2.75 per share for Integrax Bhd is deemed reasonable, most analysts asserted yesterday.
Last Friday, TNB surprised the market by making a conditional voluntary takeover offer for Integrax at RM2.75 each, by offering to acquire a 77.88% stake or 234.26 million shares it does not own currently for a total of RM644.22 million.
“The offer price represents a 21.7% premium to the five-day volume weighted average market prices of Integrax shares up to and including Jan 8, 2015 (of RM2.26), being the last full trading day prior to the date of the notice,” said TNB via a filing to the exchange last week.
Integrax closed 42 sen or 18.18% higher at RM2.73 yesterday, with 3.19 million shares traded.
Analysts are positive on the deal for TNB.
“Despite the relatively expensive offer price [for Integrax], we are positive on the acquisition exercise. We believe TNB’s decision is vested on protecting its long term interest in Janamanjung,” Hong Leong Investment Bank Daniel Wong said in a report.
With a 2,100mw capacity, TNB’s Janamanjung coal-fired power plant in Perak is its largest power plant. Moreover, there will be new commissioning of 1,010mw Manjung 4 and 1,000mw Manjung 5 by March this year and October 2017.
Wong said that the privatisation exercise will eliminate uncertainties regarding the priority in utilising the Lumut Port, which is owned by Integrax.
He noted that there has always been a concern on future potential involvement of Integrax with Brazil’s Vale International SA’s iron ore imports, which could affect the operation of TNB’s coal import at Lumut Port.
“The acquisition would be a strategic fit for TNB given the need for management control over Integrax to secure the coal-handling services for its power plant and enhance the efficiency and operations of its power station,” AmResearch’s Cheryl Tan asserted yesterday.
AllianceDBS’s Quah He Wei concurred, saying that the acquisition could result huge cost savings for TNB subsequent to the commencement of Manjung 4 and Manjung 5.
“This [offer price] is not attractive for TNB, but we believe there are substantial synergies to be derived as Integrax is involved in port operations with TNB as its single largest customer,” Quah said.
Considering TNB was sitting on a cash pile of RM8.1 billion as at Aug 31, 2014, analysts collectively opined that financing will not be an issue.
On Integrax’s side, Kenanga Investment Bank’s analyst Lim Sin Kiat said TNB’s offer was good.
“Based on FY15 [estimated financial year ending Dec 31, 2015] numbers, the implied PER [price-earnings ratio] of the deal is 18.9 times. This is about 6% premium to its peers which is at 17.9 times. This deal values it [Integrax] at a premium to its peers,” Lim said.
Other than Lim, RHB Research Institute’s Ahmad Maghfur, via his research report yesterday, also advised minority shareholders to accept the offer.
This article first appeared in The Edge Financial Daily, on January 13, 2015.