Perdana Petroleum Bhd
(July 3, RM1.54)
Maintain neutral with an unchanged target price (TP) of RM1.55: The conditional share sale agreement (SSA) between Dayang Enterprise Holdings Bhd and Affin Hwang Asset Management Bhd has become unconditional. Subsequent to the stake from Affin Hwang, Dayang has acquired additional Perdana Petroleum Bhd shares from the open market bumping its shareholdings up to 38.45%. 

Dayang has launched a mandatory general offer (MGO) for Perdana’s remaining shares and warrants not owned. We maintain our “neutral” stance with an unchanged TP as per the MGO price.

On May 14, Dayang entered into a conditional SSA with Affin Hwang to acquire 42.97 million ordinary shares of Perdana representing approximately 5.74%. From May 15 to June 8, Dayang acquired an additional 22 million shares from the open market representing almost 2.94% of the issued and paid-up capital of Perdana. Upon completion of these acquisitions, Dayang’s shareholding in Perdana will increase from approximately 29.77% to 38.45%.

Dayang has launched an MGO to acquire all the remaining shares of Perdana not already owned by Dayang for a cash offer price of RM1.55 per share and all the remaining warrants of Perdana not already owned by Dayang for a cash offer price of 84 sen per warrant.

According to the proposal, the acceptance condition of the offer must be more than 50% of the voting shares or voting rights of Perdana. In addition, it has been made known that Dayang intends to maintain the listing status of Perdana by capping its shareholding to a maximum of 75%.

The deal is expected to be finalised by the end of the third quarter of 2015. The despatch of the document will be made 21 days after the date of the proposal (July 2). The offer shall remain open for acceptances until 5pm for the first closing date, which is 21 days from the posting date, or such later date as might be announced by Dayang.

If the offer is revised after the posting date, it will remain open for acceptances for a period of at least 14 days from the date of the written notification of the revision to the shareholders.  At a 50% acceptance level, the total cash consideration from Dayang would be approximately RM134 million and at 75% acceptance level, the cash consideration would be RM424 million.

Our “neutral” recommendation is based on the offer price by Dayang. We believe that the offer price might not be enticing enough for shareholders of the company who had entered during the bull cycle of the stock price, but could offer some upside for new shareholders with average holding price of below the RM1.55 level. The offer price of RM1.55 is at an implied financial year 2015 (FY15) price-earnings ratio of 18.2 times (forecast earnings per share for FY15 is 8.5 sen) — MIDF Research, July 3

This article first appeared in The Edge Financial Daily, on July 6, 2015.