Integrax Bhd
(March 24, RM3.17)
Maintain neutral with unchanged target price of RM3.25. Perak Corp Bhd announced in an exchange filing that it had examined the terms of Amin Halim Rasip’s offer of RM3.50 per share for 5% of the company’s share in Integrax with the remaining shares to be held in a three-year moratorium period. 

Perak Corp’s board, however, is of the view that Tenaga Nasional Bhd’s (TNB) RM3.25 offer for its entire stake is superior. This is because it would have been too administratively cumbersome for Perak Corp to hold its remaining shares under the moratorium period should it take up Amin’s offer. 

Furthermore, the proposed disposal is not expected to compromise on efforts to renegotiate the operation and maintenance agreement, if pursued, between Lumut Maritime Terminal and Lekir Bulk Terminal.

This also applies to any renewal terms upon expiry of the existing agreement. The final decision by Perak Corp will be made at its March 27 extraordinary general meeting.

With Perak Corp being likely to accept TNB’s offer, we believe the former’s takeover attempt is likely to breach the 50% acceptance level successfully. 

As the March 17 deadline to raise the offer price has already passed, we are of the view that TNB’s success rate in meeting the 50% acceptance level is very high. 

As such, we continue to recommend investors to accept its offer, given that the RM3.25 per share offer for Integrax is already at a high premium to our fair value of only RM2.46.

In the event of a successful 50% acceptance level, investors that plan to reject the offer could potentially face the risk of the stock being delisted.

This is because it is likely that Integrax will fail to meet the minimum free float requirement of 25%.

TNB has earlier notified in its takeover notice that it has no intention to comply with the free float listing requirement. As such, this poses a delisting risk. — RHB Research, March 24

This article first appeared in The Edge Financial Daily, on March 25, 2015.