As shareholders decide tomorrow whether to sell their shares in Malaysia’s largest toll operator PLUS Expressways Bhd to a consortium comprising UEM Group Bhd and the Employees Provident Fund (EPF), it would be of interest for them to gauge if the offer is reasonable or fair compared with an offer for PLUS’ counterpart, MTD Capital Bhd, a toll-road operator which is also the subject of a takeover and privatisation exercise.
Shares in both companies had rallied sharply prior to the announcement of their corporate exercises, and would offer little arbitrage opportunities for the latecomer.
UEM-EPF offered to buy the assets and liabilities of PLUS for RM4.60 a share or RM23 billion, which is 18 sen or 4% higher than yesterday’s closing price of RM4.42.
On the other hand, a consortium of firms linked to MTD Cap chairman offered to buy the second largest toll operator for RM11 a share or RM3.03 billion. This is 0.36% or four sen higher than yesterday’s closing price of RM10.96.
And the valuation of MTD Capital may rise to as high as RM16.17 a share on a sum-of-parts basis, assuming the potential disposal of the toll-road assets and liabilities of MTD Prime Sdn Bhd and Metramac Corp Sdn Bhd is completed at RM3.53 billion, according to the independent adviser for the takeover exercise, AmInvestment Bank Bhd.
In terms of price-to-book (P/B) valuation, the UEM and EPF offer of RM4.60 to take PLUS private is valued at 3.93 times. For MTD Cap, the offer price of RM11 placed its P/B value at 4.58 times.
Enterprise valuation-wise, PLUS has an enterprise value (EV) of RM31.29 billion based on the takeover price. It had earnings before interest, taxes, depreciation and amortisation (Ebitda) of RM1.86 billion for the nine-month period ended Sept 30, 2010.
If we annualise the nine-month figure, it implies a full-year Ebitda of RM2.48 billion. This translates into an EV/Ebitda multiple of 12.6 times for PLUS.
For MTD Cap, its EV stood at RM4.75 billion based on its takeover offer price of RM11. Its Ebitda was RM151.18 million for the six months ended Sept 30, or an annualised RM302.36 million for the full year. This translates into an enterprise multiple valuation of 15.7 times.
In general, EV multiples could offer a better gauge for takeover exercises than market capitalisation alone, as it takes into account the debt or cash that the buying companies will assume. EV is calculated as market capitalisation plus the company’s debt and minus its cash.
From a price-to-earnings ratio (PER) perspective, PLUS had a forward PER of 17.2 times while MTD Cap’s forward PER was 39.14, according to Bloomberg data.
And lastly, based on UEM-EPF’s offer price of RM4.60 and Ebitda per share of 37.3 sen for the nine-month period ended Sept 30, PLUS had a price to Ebitda ratio of 12.33 times.
In MTD Cap’s care, its price-to-Ebitda ratio was 18.34 times for the six-month period ended Sept 30, based on Ebitda per share of 54.97 sen and offer price of RM11.
Although both are privatisations of toll concessionaires, the takeover offer for MTD Cap falls under the new ruling for the takeover of a listed company via the assets and liabilities route as announced by the Securities Commision and Bursa Malaysia on Jan 28 this year. The new rules are not retrospective and thus, PLUS is spared.
Under the new ruling, the threshold for shareholder approval in a listed company disposing of its assets and liabilities is raised to 75% from a bare majority previously. This could well lead to the higher premium MTD Cap can fetch compared with its counterpart.
These new rules effectively give MTD Cap’s minority shareholders an upper hand compared with PLUS’ minority shareholders since all that was required by UEM-EPF under the assets and liabilities route was approval by a bare majority of PLUS’ shareholders. - by Yantoultra Ngui Yichen, theedgemalaysia.com
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