Wednesday, May 6, 2009

Kingboard Buyout - CIMB

Offer price at 17% premium to last traded price. KCF’s Hong Kong-listed parent company, Kingboard Laminates (1888 HK, HK$3.07, NR), yesterday made a takeover offer for KCF via a cash offer, share swap or combination of both. Kingboard Laminates currently owns 63.97% of KCF. It is offering each KCF share for 21 Scts or 0.374 new Kingboard Laminates share. Shareholders of KCF can opt to receive both cash and shares of Kingboard Laminates.

Rationale. According to the announcement, the reasons for the takeover include:

1. Opportunity for KCF shareholders to realise their investment as the offer price
represents a 27.3% premium to its closing price prior to the announcement

2. Prolonged undervaluation and illiquidity of KCF shares

3. Better integration and greater efficiency within the Kingboard Laminates Group

4. No necessity for accessing capital markets given a net cash position of HK$193m as at 31 Dec 08

5. Opportunity for KCF shareholders to participate in the enlarged Kingboard Laminates Group

6. Reduces compliance costs related to listing.

Offer price slightly ahead of our year-end target price of 19.5 Scts... The offer price represents an 8% premium to our new target price for KCF after it announced a very weak set of 1Q09 results last week. For short-term investors looking to exit, we would advise them to take up this offer.

…but big discount to book value. For long-term investors, however, we deem the offer price unattractive, valuing the company at a huge discount to its last announced book value of HK$3.12 or 0.35x P/BV vs. Kingboard Laminate’s 1.3x P/BV. We would advise them to hold on to their investments. In the meantime, for investors looking for PCB exposure, we recommend Elec & Eltek (ELEC SP, US$1.12, Outperform) and Jadason (JAD SP, S$0.65, Buy).

1 comment:

Anonymous said...

Hi - I am holding onto 20 units of Kingboard. Can you tell me what happened to the privatisation now. What should I do?

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