KUALA LUMPUR (Oct 30): Furniture makers Euro Holdings Bhd piqued investors' interest in early trade today on speculation that the company may embark on corporate exercise.
At 11.30am, the counter was up three sen or 14.63% to trade at 23.5 sen, after hitting a high of 24 sen, giving it a market capitalisation of RM49.82 million.
The trading volume also ballooned to 10.54 million as at 11.30am, as compared to merely 270,000 yesterday. The past 200 days average volume of the counter stood at 412,490 shares.
Commenting on this, a dealer told theedgemarkets.com that the sudden rise of interest could be due to possible corporate exercise such as reverse takeover or back door listing.
"The trading volume of the counter is thin over the past three months, average at about 300,000 per day," the dealer said.
Recall that on Sept 3 last year, Euro Holdings received a conditional mandatory takeover offer from its executive director and two major shareholders to acquire the remaining 52.3% stake that they do not already own, for 44 sen a share.
The joint offerors include Euro Holdings executive director and major shareholder Datuk Seri Choong Yuen Keong and two other major shareholders, Datuk Tong Yun Mong and Tee Wee Sien. They intended to acquire all the remaining shares, amounting to 42.394 million shares in Euro Holdings not already held by them.
Following that, the independent adviser DWA Advisory said in an independent advice circular dated Oct 3 last year that the offer was not fair and not reasonable, thus recommended the shareholders to reject the offer.
According to DWA Advisory, the offer price represents a discount of 59 sen or 57.28% to a fair value per Euro Holdings' share of RM1.03, based on the revalued net asset valuation (RNAV) methodology.
"The offer will be considered not fair if the offer price is lower than the fair value and market prices of Euro Holdings' shares, and vice versa," the firm added.
But the takeover fell through eventually as the joint offerors failed to meet the acceptance condition.
According to an announcement dated Oct 14 last year, Euro Holdings said the joint offerors collectively hold 38.61 million Euro Holdings shares representing approximately 47.66% of the equity interest in the group as at closing date.
For the second financial quarter ended June 30, 2015 (2QFY15), Euro Holdings posted a 77% decline in net profit to RM315,000 from RM1.38 million a year ago.
Revenue for the period was also lower at RM20.68 million compared to RM27.69 million in 2QFY14.
The group attributed the lower earnings to weak demand from both export and local markets.
"Global demand of our products decreased amid weak crude and commodity prices while the local market was affected as consumers adjusted to the impact of the goods and services tax, which kicked in in April 2015," it added.
(Note: 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.)