KUALA LUMPUR (May 25): Redtone International Bhd (Redtone) shares slid 2.5 sen or 3.12% lower at 77.5 sen as at 4.01pm today - after some 364,300 shares changed hands - affected by the weaker overall market.
An analyst told theedgemarkets.com that major shareholders and “friendly parties” are not trading their shares after the unconditional general offer (GO) by Berjaya Corp Bhd (BCorp) closed last Friday.
In addition, the weak market today has accepted medium and small-cap stocks, including REDtone, he said.
BCorp had received valid acceptances that raised the combine holdings of its unit Juara Sejati Sdn Bhd and persons acting in concert (PACs) to 52.43% of Redtone’s (fundamental: 2.3; valuation: 0.5) paid-up capital, with its irredeemable convertible unsecured loan stocks (ICULS) holdings at 70.59%.
To recap, BCorp, via Juara Sejati, had made a cash offer of 80 sen per REDtone share and 32 sen per REDtone’s ICULS on March 27, after having triggered a mandatory takeover obligation.
The analyst today also said even the 11th Malaysia Plan (11MP) that was announced by Prime Minister Datuk Seri Najib Razak last week had failed to excite the market.
The country’s sovereign debt and weak ringgit have further weighed on investors' sentiments over the past few weeks, he added.
“If you check foreign outflow, there has been quite a decent number of foreign selling. The outlook and plan (11MP) looks great but the problem is, where is the money going to come from? Execution and funding has always been an issue [here],” he added.
The FBM KLCI fell sharply at mid-day break today, losing 17.53 points to 1769.97, as market sentiment turned bearish in line with slumping regional markets.
In a note today, Kenanga Investment Bank Bhd said the lukewarm response from REDtone’s shareholders’ for the GO, even after a two-week offer extension, is not a surprise given that the offer appears less appealing to long-term investors.
The research firm said the emergence of strong shareholders in the form of BCorp and Sultan of Johor Sultan Ibrahim Sultan Iskandar have further enhanced REDtone’s profile and competitive edge in projects bidding moving forward, especially from companies controlled by the Johor state government or other government-related projects.
Kenanga Investment Bank also said corporate exercises or synergistic tie-ups could be expected in view of the two shareholders, but these are expected to only materialise in the mid-to-long term.
The research firm also said REDtone’s long-term outlook is dependent on BCorp’s intentions for REDtone, which remains vague at this juncture.
(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.)