In the latest development, the offeror — Adamus Avenue Sdn Bhd — had extended the closing date of the offer by two weeks from the original date of tomorrow to July 9, according to its announcement to Bursa Malaysia yesterday.
Could this be a sign that the take- up rate thus far has been weak?
According to sources, there are already close to 80% acceptances to date although on paper, the acceptance rate is 62.19%.
“The shareholding is fragmented by companies owned by the Melewar Group which are believed to be for the takeover. Although these shareholders intend to accept the offer, they will need time to go through the whole process of getting their respective board and shareholder approvals.
“As such, the recent extension in the offer of M3nergy is two fold… one is to allow time for the shareholders who they know are going to accept the deal to go though the legal process and two, to allow more time for minority shareholders to accept,” said the source.
As at June 19, Adamus Avenue has received over 71% acceptances for M3nergy, according to reports. Indeed, the current takeover bid appears to have the support of the Melewar Group of companies controlled by major shareholder, Tunku Datuk Yaacob bin Tunku Tan Sri Abdullah.
Back in August 2008, Melewar Equities (BVI) Ltd — the largest shareholder of M3nergy — undertook a takeover bid for the oil and gas company at RM1.20 per share. Some minority shareholders were unhappy with the offer, citing it as too low compared to the company’s net tangible assets (NTA) per share of RM3.30 then. When the first offer closed in November 2008, Melewar managed to acquire only a 72.78% stake and was not able to take the company private.
So, will it be any different this time around?
The current takeover offer was launched by Adamus Avenue, a company owned by M3nergy’s CEO and managing director Datuk Shahrazi Sha’ari and his wife Datin Tinawati Nordin.
The offer price for the current takeover is RM1.85 per share which is at a premium of 16 sen or 9.47% over the closing share price of RM1.69 on May 14, before the stock was suspended and the takeover offer announced on May 17. Its shares traded at RM1.72 on June 23. The current offer is, however, at a substantial discount of RM1.34 per share, or 42% below M3nergy’s consolidated NTA per share of RM3.19 as at March 31, 2010. Effectively, it prices the company at 0.58 times book.
As Adamus needs over 90% for the takeover of M3nergy to succeed, it needs another 20% of voting shares. Will the remaining shareholders accept the deal?
Looking at its financial performance, M3nergy seems to have regained its footing.
For its recent quarter ended March 31, 2010 (3QFY10), M3nergy registered a net profit of RM5.3 million compared to a net loss of RM15.8 million in its previous corresponding quarter. The company’s revenue for 3QFY10 was RM81.8 million compared to RM59.7 million a year earlier.
For the cumulative nine-month period, M3nergy’s revenue was RM266 million as compared to RM150.6 million for the corresponding period ended March 31, 2009. The significant increase came from two divisions — the oil and gas services (O&G) division, as well as the engineering, procurement and construction (EPC) division. The two divisions contributed approximately 48% and 42%, respectively to total revenue.
In the nine months to March 31, 2010, M3nergy generated a net profit of RM9.13 million, or 7.26 sen per share, compared to a net loss of RM11.83 million for the corresponding period of the last financial year.
Underlying profits for the company were actually higher, as there was a net loss on disposal of a subsidiary amounting to RM3.47 million.
Stripping out the loss, the company’s earnings per share would be 38% higher at 10.02 sen.
It certainly seems as though the company is on steadier footing compared to the previous year. For its financial year ended June 30, 2009, M3nergy had slipped into the red, with net loss of RM13.2 million on revenue of RM276.7 million, versus net profit of RM9.26 million and revenue of RM168 million in FY08.
Although the company’s financial performance has picked up, the stock, however, has not seen much trading interest. The daily trading volume of M3nergy over the past year has been low. That, together with the small premium over market prices, have been cited as some of the main reasons for shareholders to accept the offer.
M3nergy has an average 52-week daily trading volume of 107,253 shares, and a 52-week average trading price of RM1.62. From its 52-week high of RM1.92 in November 2009, the stock hit its 52-week low of RM1.36 on March 23 and was last traded at RM1.72.
According to M3nergy’s independent advice circular to shareholders, the offer provides shareholders the opportunity to realise their investment in the company at a higher return than it would in disposing of M3nergy’s shares in the open market, given that the shares have been thinly traded and trading volume has been low.
Even so, the independent adviser, TA Securities Holdings Bhd, noted that the historical market prices of M3nergy shares and the offer price are at significant discount to the NTA per share. It noted that the average price-to-book ratio for domestic listed oil and gas stocks was 1.86 times, based on their shares prices on May 27.
“In view of this and after taking a holistic view of all other considerations, we are of the opinion that the offer is not fair,” it said.
Nevertheless, if sources are right, nearly 80% of M3nergy’s voting shareholders, out of which over 70% are from the Melewar Group of companies, are already game for this RM1.85 per share offer. The question now is, what is the view of the other 20% of voting shareholders?
This article appeared in The Edge Financial Daily, June 24, 2010.
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