Analysts gave mixed views over MMC Corp Bhd's (2194) plans to buy over UEM Group Bhd, with many saying that they were not sure of its rationale and that the intention had been made known only in recent days.
On Monday, MMC acknowledged that it had made a preliminary proposal to acquire UEM. It was responding to a query from Bursa Malaysia following reports of the takeover bid.
Earlier reports, which did not name sources, said MMC was making a RM15.6 billion offer to buy over UEM whose ultimate prized possession is undoubtedly PLUS Expressways Bhd, concessionaire of several highways, including the North-South Expressway.
OSK Research said the RM2.8 billion offer that MMC supposedly made for Khazanah's 16.7 per cent stake in UEM would also mean that PLUS would be valued at RM16.7 billion, still significantly lower than its current market capitalisation value of some RM21 billion.
"Furthermore, MMC's two largest shareholders - Permodalan Nasional Bhd and the Employees Provident Fund - have not been consulted in the structuring of the proposal," it said.
If that was so, it would be an unusual move by MMC, which has generally ensured the support of its two largest shareholders (other than Tan Sri Syed Mokhtar Al Bukhary) in all of its major proposals," OSK said in its research note.
OSK also said it was unsure if the proposal would be accepted by the Ministry of Finance (MOF).
The research house is maintaining the stock's "neutral" recommendation for now given the many uncertainties, with no change to its earnings or fair value of RM3.07.
Little has been heard from UEM itself apart from chief executive Datuk Izzaddin Idris telling Business Times last week that he was unaware of any takeover plans by MMC.
OSK said MMC's net gearing as at June this year was 271.7 per cent, which was uncomfortably high and not expected to excite potential bondholders should the deal be financed by debt papers.
However, Mercury Securities analyst Edmund Tham sees the deal as a good fit for MMC to strengthen its construction and infrastructure business.
Tham said that MMC could leverage on UEM's status as master developer of the Iskandar Malaysia development project in Nusajaya, Johor, and find synergies for future development projects involving property, commercial, logistics, warehousing, industrialisation or the port business.
Another analyst from CLSA felt that the proposal was surprising given UEM's sheer size and the high financing required for the purchase.
"Historically, MMC is mostly known for its power and port businesses. So the move is unusual, but possibly MMC, which has stakes in IJM Corp Bhd, wants to expand and beef up its construction and property businesses," said the analyst.
Earlier reports, which did not name sources, said MMC was making a RM15.6 billion offer to buy over UEM whose ultimate prized possession is undoubtedly PLUS Expressways Bhd, concessionaire of several highways, including the North-South Expressway.
OSK Research said the RM2.8 billion offer that MMC supposedly made for Khazanah's 16.7 per cent stake in UEM would also mean that PLUS would be valued at RM16.7 billion, still significantly lower than its current market capitalisation value of some RM21 billion.
"Furthermore, MMC's two largest shareholders - Permodalan Nasional Bhd and the Employees Provident Fund - have not been consulted in the structuring of the proposal," it said.
If that was so, it would be an unusual move by MMC, which has generally ensured the support of its two largest shareholders (other than Tan Sri Syed Mokhtar Al Bukhary) in all of its major proposals," OSK said in its research note.
OSK also said it was unsure if the proposal would be accepted by the Ministry of Finance (MOF).
The research house is maintaining the stock's "neutral" recommendation for now given the many uncertainties, with no change to its earnings or fair value of RM3.07.
Little has been heard from UEM itself apart from chief executive Datuk Izzaddin Idris telling Business Times last week that he was unaware of any takeover plans by MMC.
OSK said MMC's net gearing as at June this year was 271.7 per cent, which was uncomfortably high and not expected to excite potential bondholders should the deal be financed by debt papers.
However, Mercury Securities analyst Edmund Tham sees the deal as a good fit for MMC to strengthen its construction and infrastructure business.
Tham said that MMC could leverage on UEM's status as master developer of the Iskandar Malaysia development project in Nusajaya, Johor, and find synergies for future development projects involving property, commercial, logistics, warehousing, industrialisation or the port business.
Another analyst from CLSA felt that the proposal was surprising given UEM's sheer size and the high financing required for the purchase.
"Historically, MMC is mostly known for its power and port businesses. So the move is unusual, but possibly MMC, which has stakes in IJM Corp Bhd, wants to expand and beef up its construction and property businesses," said the analyst.
By Zaidi Isham Ismail
Business Times
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