Titan Chemical Corp Bhd requested that trading in its shares be suspended today pending an announcement of a corporate proposal involving the major shareholders of the company.
Market talk is that a general offer (GO) for the company is in the works, which could come after two of the company’s largest shareholders sell their respective stakes in Titan.
Union Harvard Investments is the largest shareholder with a 31.62% stake or 546.4 million shares in Titan, followed by Amanahraya Bhd with 24.6% or 425 million shares and Permodalan Nasional Bhd (PNB) with 5.58% or 96.4 million shares. PNB also has a 24.6% indirect stake, taking its total equity interest to 30.18% or 521.4 million shares.
Union Harvard is the vehicle of Datuk James Y Chao and his family who hail from Taiwan. The Chao family directly and indirectly control about 37.27% or some 644 million shares in Titan.
Collectively, the Chao family and PNB’s stakes have a market value of some RM2.15 billion.
Although market talk has been rife of Titan being privatised, pricing and other salient features have yet to surface. One name that has cropped up as a buyer is China Petroleum and Chemical Corp (known as Sinopec Corp), but this remains unsubstantiated.
It is noteworthy that Titan’s retail portion of its initial public offering was priced at RM2.17 a share, back in 2005.
News reports had speculated that Titan’s largest shareholders, the Chao family and PNB would sell out.
In reply to a query by Bursa Malaysia, Titan had said the Chao Group and PNB “are presently in informal discussions with a third party subsequent to a proposal which was presented to them by that third party. There is as yet no outcome, event or other development from such discussions”.
At the closing price of RM1.85 yesterday, Titan is trading below its book value of RM2.49 per share, giving an attractive price-to-book value of 0.74 times. The company has a market capitalisation of RM3.24 billion as of yesterday’s close.
The RM1.85 closing price is the highest for the counter since February 2007, which would be a good level for local major investors such as Amanahraya and PNB to exit the investment if they so wished.
Titan’s net profit for the second quarter ended June 30 fell to RM72.13 million from RM174 million a year ago. Revenue was RM1.69 billion against RM1.37 billion. Earnings per share were 4.17 sen versus 9.97 sen.
As at June 30, the company was in a net debt position of about RM609.2 million.
Titan said the weaker earnings performance “was due to lower polymer-naphtha margins resulting from higher naphtha prices”. The petrochemical naphtha is Titan’s main raw material.
Titan had once been a “hot stock” but a drop in demand for its products resulted in a loss for the financial year ended Dec 31, 2008 and this derailed its momentum.
“Ever since then, although Titan has gotten back on the growth track, investors still seem to be wary of its performance,” an analyst said in an interview in April.
This article appeared in The Edge Financial Daily, July 15, 2010.
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