Friday 29 Mar 2024
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KUALA LUMPUR: Minority shareholders of REDtone International Bhd have been advised not to make a hasty decision on whether to accept Berjaya Corp Bhd’s (BCorp) takeover offer for REDtone for 80 sen per share cash and 32 sen per irredeemable convertible unsecured loan stock (Iculs).

“From a short-term investor’s perspective, it depends on the entry price (at which REDtone stock was bought). Of course, if it was below the offer price of 80 sen, then there’s no harm in taking profit [by accepting BCorp’s offer].” Kenanga Research analyst Cheow Ming Liang told The Edge Financial Daily.

However, Cheow is of the view that minority shareholders with holding power should hold out in the offer to sell their shares to BCorp and wait for future developments in the telecommunications company (telco).

“Otherwise, why should a big group like Berjaya be aggressive in increasing its stake, get the Sultan of Johor in and then launch a takeover bid?” he asked.

Cheow said the government contracts REDtone expects to secure this year, as well as its venture into the Internet of Things (IoT) services would serve as a catalyst for the telco. 

In an email reply to The Edge Financial Daily, REDtone group chief executive officer Lau Bik Soon said the teleradiology service, which the telco soft launched in mid-2014, has been gaining traction in the private sector. 

“We are [also] tendering for multiple projects (from the government and other parties) worth over RM1 billion. With our extensive industry knowledge, expertise and good track record, we are hopeful of getting some sizeable projects this calendar year,” he said.

Last Friday, BCorp (fundamental: 0.35; valuation: 1.2) made a conditional takeover offer to mop up the rest of REDtone (fundamental: 2.3; valuation: 0.3) shares via its wholly-owned subsidiary Juara Sejati Sdn Bhd, confirming an earlier report by 

theedgemarkets.com on the same day. 

The offer price represents a 3.61% discount to the last closing price of REDtone shares at 83 sen prior to the suspension on March 26, and a 5.44% discount to the five-day volume weighted average market price of 84.6 sen. 

In a filing with Bursa Malaysia, BCorp said Juara Sejati had last Friday acquired 70.09 million shares or 10.53% of the issued capital in REDtone for RM56.08 million cash from REDtone group chairman Datuk Seri Syed Ali Abbas Alhabshee’s private vehicle, Tema Juara Sdn Bhd. 

Consequently, Syed Ali has ceased to be a shareholder of REDtone.

Following the share acquisition, the shareholdings of Juara Sejati and the parties acting in concert (PACs), increased to 35.84% from 25.31%, thereby triggering the mandatory takeover obligation. 

The PACs are BCorp as the ultimate offeror, Berjaya Philippines Inc, Prime Credit Leasing Sdn Bhd, Berjaya Group Bhd, tycoon Tan Sri Vincent Tan Chee Yioun and Sia Git Kim.

The takeover offer is conditional upon Juara Sejati and the PACs holding more than 50% of the voting shares by the closing date. However, Sultan Ibrahim of Johor has indicated that he will not be selling his 20.13% stake. 

BCorp said it intends to maintain REDtone’s listing status. 

There has been speculation of a corporate exercise developing in the integrated telecommunications services provider over the last two weeks, following the notable emergence of the Sultan of Johor as a substantial shareholder of the group. 

Two separate off-market transactions last Friday added to the speculation. 

On March 16, REDtone announced the Sultan of Johor’s emergence as the single-largest shareholder of the telco, with a direct 20.13% stake, following conversion of his warrants and Iculs to ordinary shares, and the purchase of shares from the market.

As at March 27, BCorp holds a direct 31.3% stake in REDtone, while Tan owns 1.05% of the telco’s shares.

Both BCorp and REDtone shares were suspended from trading last Friday, pending the announcement of the takeover. 

REDtone shares were last traded at 83 sen, giving it a market capitalisation of RM552.28 million, while BCorp shares were last traded at 44 sen, bringing its market cap to RM1.82 billion.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.comfor more details on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on March 30, 2015.

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