Tanjong (2267) has always been seen as one of the best long-term investment options for investors, especially foreign ones, for a mix of its decent gross dividend yields of about 6 per cent, growth potential and strong management.
In a market that analysts say offered slim pickings for foreign funds, it became an obvious target for many blue-chip names like the UK-based Capital Group International, which owns 6.1 per cent of the shares, Schroder Investment Management and Fidelity International."It's really an investment you wouldn't lose sleep over," observed an analyst of the stock.
So, for investors to be willing to part with their shares, TCSB would have known that its offer would have to be generous.
Analysts seem to think the offer, at RM21.80 apiece, is attractive enough. The offer, which values Tanjong at RM8.8 billion, represents a 21.9 per cent premium over the stock's last traded price before the announcement was made.
It beats the upper end of the market's fair value by 7 per cent and is also higher than the stock's peak of RM19.70 over the last 10 years.
Tanjong rose 20 per cent to close at a record RM21.14 yesterday on its first day of trading after the news.
TCSB, which owns a 47 per cent stake in Tanjong, said it will be better to take the firm private as it needs to spend substantially at this stage of its growth to become a global player in the power generation industry.
It aims to double its power generation capacity and could require some US$4 billion (RM12.64 billion) - or US$1 million for each megawatt it acquires - in financing, according to research firm ECM Libra Investment Research.
This is a whopping 1.8 times its market capitalisation. "Lest minority shareholders voice their displeasure in being required to finance the acquisition via rights issues or have their dividends reduced, we believe the major shareholders chose to privatise Tanjong," ECM Libra said in a note to clients yesterday.
Some analysts believe the offer price already partially includes Tanjong's growth upside over the medium term.
"We deem the offer price of RM21.80 attractive as it would have partially factored in the group's growth upside from future power acquisitions, for which investors may have to wait at least a year or two to realise such upside, and a longer three to four years if the future projects were to be greenfield in nature," OSK Research said.
This was based on the research house's back of the envelope calculation that assumed a 70:30 debt equity financing ratio for Tanjong, an internal rate of return of up to 13 per cent and a weighted average cost of capital of 10 per cent.
Post-privatisation, Tanjong could unlock the value of its core profitable businesses - gaming and power - by potentially relisting both entities in the future with valuations comparable to those of its currently listed pure power and gaming peers, OSK noted.
It currently trades at a discount to its "purer" peers.
A relisting would not be surprising given that Ananda, who took telco Maxis Communications Bhd private in 2007, later brought the domestic business back to the market last year.
He has also taken pay-TV operator Astro All Asia Networks plc private this year and last week, made a similar offer for satellite operator Measat Global Bhd.
By Adeline Paul Raj
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