KUALA LUMPUR: CIMB Equities Research is retaining its Add recommendation for property company LBS Bina Group and target price of RM1.85, based on a 40% discount to its realised net asset value (RNAV).
It said on Tuesday LBS’s general offer for ML Global, a roof tile manufacturer-cum-contractor, was a small positive surprise.
“LBS’s offer prices value ML Global at RM51.8mil or 5.1 times CY15 net profit,” it said.
CIMB Research said the takeover could enhance LBS’s earnings base and complement its existing construction businesses.
On Monday, LBS Bina raised its stake in ML Global from 31.95% to 50.92% after it bought 17 million shares from the managing director Datuk Beh Hang Kong.
LBS paid 56 sen per share (or RM9.5mil for the 17 million shares), which was 6% lower than MLG’s last traded share price.
LBS also made a cash offer to acquire the remaining 49.08% stake in ML Global for 56 sen per share and 17.6 million MLG warrants for six sen per warrant. These value ML Global at RM51.8m.
ML Global is involved in construction activities and the manufacturing and trading of roof tiles.
LBS participated in ML Global’s fund-raising exercise in 2014 and raised its stake further by acquiring additional shares in the open market.
“We gather from LBS that it wants to grow ML Global’s construction business further and intends to maintain ML Global’s listing status.
“Although LBS has an existing construction arm, this division’s capacity is almost fully utilised due to the growing order book of internal jobs. The acquisition of ML Global will allow LBS to depend less on third-party contractors for its own developments while gaining new capacity for external jobs.
“LBS’s offer prices value ML Global at 5.1 times CY15 P/E. This is at a deep discount to the average P/E of 15 to 16 times for the construction sector.
“However, it is uncertain whether the minority shareholders will accept LBS’s offer as LBS prices the ordinary shares and warrants at 6% and 82% discounts to their respective market prices.
“Assuming that ML Global repeats its 2015 earnings performance in 2016-18 and none of the minority shareholders accept LBS’s offers, we estimate the acquisition of shares from Beh will enhance LBS’s FY16-18 EPS by circa 1%. If all the minority shareholders accept the offers, the exercise could enhance LBS’s FY16-18 EPS by 4%,” said CIMB Research.
LBS (5789) - CIMB Research retains Add for LBS Bina
