The offer price was derived from SAR's 20-day volume-weighted average price (VWAP) prior to 20 Mar 09, but falls 4.5% below SAR's last transacted price and 7.9% short of its six-month VWAP. In addition, it values SAR at a modest 2.2x FY09F PER and 1.2x FY09F NAV - far lower than the 11x PER price tag that Chinalco and Alcoa forked out for their stake in mining company Rio Tinto just a year ago. We are of the view that the takeover offer undervalues SAR, and do not expect investors to accept the offer. SAR will be appointing an independent financial adviser to provide a recommendation in connection with the offer.
No intention to privatise SAR. PTT's takeover offer for SAR appears to be a procedural obligation as a result of it crossing the 30% ownership level. It has articulated its intention to retain SAR's listing status on the SGX-ST, and added that it currently has no plans to introduce any major changes to SAR's business, redeploy its fixed assets, or discontinue the employment of its employees. As such, the takeover offer will probably result in a change of SAR's effective ownership with no major changes to the group's strategy or management.
Good dividends and earnings prospects provide little incentive to accept offer. SAR's shareholders may reap better returns in the long term by holding on to their shares, given the group's generous dividends and robust outlook. SAR's dividends yielded a generous 11.5% return in FY08, and we expect FY09 yield to increase to 17.8% on the back of higher earnings. Earnings are expected to more than double in FY09 thanks to higher coal prices secured during the commodity boom in 2008.
Sound fundamentals, maintain BUY. PTT's takeover offer puts an end to months of speculation over SAR's privatisation. It also rules out any acquisition by Noble Group Ltd (previously reported to be one of the interested bidders) or other strategic investors in the near term. We maintain our BUY rating and S$1.15 fair value estimate for SAR and do not expect PPT to raise its offer price. As for Noble, our BUY rating and S$1.33 fair value estimate remains intact.
Sponsored Links
No comments:
Post a Comment