Sembawang Kimtrans- General offer by Toll

􀂾 Story: SBKT announced that Toll Holdings has made a
general offer for the remaining 74% of shares that it does not
already own at 70cts per share, rising to 80cts per share if it
receives acceptances up to 90%, allowing privatization of SBKT.
􀂾 Point: Although the first-tier offer of 70cts per share is
unattractive (20% lower than our target price of S$0.88), two
major shareholders controlling a total of 31.2% of SBKT have
given an irrevocable undertaking to accept Toll’s offer, which
gives a boost to Toll’s chances of achieving the necessary 90%
stake to take the company private, which would then raise the
offer price for SBKT to 80cts per share for share-holders.
􀂾 Relevance: We believe that investors who see more value in
SBKT could hold on against the offer and could benefit if a) Toll
raises their offer if they were serious about privatizing the
company or b) Toll helps to raise SBKT’s value via business
synergies with itself or further restructuring of its Asian assets
into SBKT e.g. the old Semblog businesses.
General offer for Sembawang Kimtrans by Toll Holdings. Australialisted
Toll Holdings, has via its subsidiary Toll Express (Asia) Pte Ltd,
announced its intention to make a voluntary cash offer for all the
remaining ordinary shares in SBKT that it does not already own. Toll has
already received undertakings by Kimtrans Singapore (22.17%) and Tan
Choon Hock (8.96%) to accept their offer, which means the first tier
offer of 70cts is unconditional, as Toll would have more than 50% of
SBKT.
1st tier offer of S$0.70 is unattractive vis-à-vis SBKT’s growth prospects.
We find Toll’s first-tier offer price of S$0.70 unattractive, as we believe
that it does not fully reflect the Group’s earnings prospects or a control
premium. The offer price of 70cts works out to be undemanding 10.8x
FY08 PER and at the second-tier price of 80cts, it works out to be 12.3x
FY08 PER. The S$0.70 offer on offer pales on further comparison to the
last close of S$0.74 per share – shareholders are better off selling in the
market.
Difficult to tell if the offer can attain a 90% acceptance level. Investors
may wish to take profit if SBKT trades up to or close to 80cts, as there is
no guarantee that Toll would receive the required 90% acceptance rate
and the offer may close at only 70cts per share.