TENAGA (5347) - Tenaga Nasional - Revised offer for Integrax
Target RM18.42 (Stock Rating: ADD)
We are neutral on Tenaga's revised offer price for Integrax, which represents an 8% premium over its last closing price and a 43.8% premium over its closing price of RM2.25 as per the first offer in early-Jan 2015. The revised offer price increases Tenaga's outlay by RM117m to RM761m, which will not be an issue in terms of funding. While other minority shareholders might be open to accept the revised offer, we believe Integrax's major shareholder Amin Halim Rasip could still hold on to his stake. We maintain our Add call on Tenaga, with an unchanged target price of RM18.42 based on 15x FY16 earnings. Improved earnings from higher coal generation are likely catalysts.
What Happened
Tenaga has announced that it is increasing its offer for the Integrax shares it does not own to RM3.25 from RM2.75 previously. The offer also extends to shareholders who had accepted the initial offer of RM2.75 per share. This new offer stands until 15 Mar 2015. The revised offer represents an 8% premium over Integrax's closing share price yesterday. The new offer will result in Tenaga forking out a total of RM761m for the 77.9% of the total share base that it does not own.
What We Think
We think the higher offer price signifies Tenaga's intent to gain control of Integrax. Integrax's port is expected to serve Tenaga's coal power plant in Manjung, which is still expanding and will account for almost 20% of Peninsular Malaysia's total generation capacity by Mar 2015. We had highlighted in our last report on the acquisition that Tenaga was facing difficulties as the major shareholder had refused to accept the offer. The reason for the reluctance on the part of Amin Halim Rasip, Integrax's major shareholder, is that he believes the offer price undervalues the company. Furthermore, media reports suggest that Amin is intent on broadening its client base beyond Tenaga.
What You Should Do
We maintain our Add call on Tenaga, with an unchanged target price of RM18.42. As in our last note on the matter, we remain neutral on the higher offer as we believe Tenaga is keen to secure Integrax for strategic purposes. We also believe that Tenaga might not need to fully take control of the company but to secure just a majority stake in order to steer the company to suit its needs.
Source: CIMB Daybreak - 27 February 2015
Target RM18.42 (Stock Rating: ADD)
We are neutral on Tenaga's revised offer price for Integrax, which represents an 8% premium over its last closing price and a 43.8% premium over its closing price of RM2.25 as per the first offer in early-Jan 2015. The revised offer price increases Tenaga's outlay by RM117m to RM761m, which will not be an issue in terms of funding. While other minority shareholders might be open to accept the revised offer, we believe Integrax's major shareholder Amin Halim Rasip could still hold on to his stake. We maintain our Add call on Tenaga, with an unchanged target price of RM18.42 based on 15x FY16 earnings. Improved earnings from higher coal generation are likely catalysts.
What Happened
Tenaga has announced that it is increasing its offer for the Integrax shares it does not own to RM3.25 from RM2.75 previously. The offer also extends to shareholders who had accepted the initial offer of RM2.75 per share. This new offer stands until 15 Mar 2015. The revised offer represents an 8% premium over Integrax's closing share price yesterday. The new offer will result in Tenaga forking out a total of RM761m for the 77.9% of the total share base that it does not own.
What We Think
We think the higher offer price signifies Tenaga's intent to gain control of Integrax. Integrax's port is expected to serve Tenaga's coal power plant in Manjung, which is still expanding and will account for almost 20% of Peninsular Malaysia's total generation capacity by Mar 2015. We had highlighted in our last report on the acquisition that Tenaga was facing difficulties as the major shareholder had refused to accept the offer. The reason for the reluctance on the part of Amin Halim Rasip, Integrax's major shareholder, is that he believes the offer price undervalues the company. Furthermore, media reports suggest that Amin is intent on broadening its client base beyond Tenaga.
What You Should Do
We maintain our Add call on Tenaga, with an unchanged target price of RM18.42. As in our last note on the matter, we remain neutral on the higher offer as we believe Tenaga is keen to secure Integrax for strategic purposes. We also believe that Tenaga might not need to fully take control of the company but to secure just a majority stake in order to steer the company to suit its needs.
Source: CIMB Daybreak - 27 February 2015
