KUALA LUMPUR: OSK Research is positive on Multi Sports Holdings Ltd's plans to sponsor a Taiwan depository receipt programme (TDR) that would represent up to 67.50 million new shares of 5 US cents each or 15% of the current paid-up share capital.
Under the plan, Multi Sports It would issue up to 67.50 million new shares at an issue price to be determined later, which would be the underlying shares for the programme.'' The TDR will be offered to investors in Taiwan, it said. The ratio would be two TDR for every one underlying share.
The issue size is up to 135 million units of TDRs represented by up to 67.5 million underlying shares.
OSK Research said based on the illustrative issue price of 50 sen, the exercise will raise total proceeds of up to RM33.75m, of which RM2.3m will be used for the proposed exercise's expenses while the remaining portion will be used for on-going working capital purposes.
'Apart from creating a new listing platform for the group in Taiwan that could provide an alternative valuation for its shares, the proposed exercise will enhance Multi sports' profile in Taiwan where investors are perceived to be more familiar with Chinese companies.
'In addition, while Multi sports has sufficient internal funds to fund the expansion of its plant, which was completed in Dec 2010 as well as working capital requirements, the proposed exercise will also provide Multi sports with easier future access to the Taiwanese capital market,' it said.
OSK Research said the listing of the TDRs on the TWSE will also give Taiwanese investors an opportunity to acquire a shareholding in the company and hence diversifies the group's shareholder base.
'Upon completion of the exercise and assuming the issuance of the 67.50 million underlying shares, our ex-target price is reduced to 76 sen versus the cum target price of 87 sen, which still represents a 54% share price upside.
'While there will be EPS dilution, we think that the benefits of a potential rerating of the shares' valuation driven by the potentially higher valuation that may command in Taiwan, would outweigh the negative effects on an EPS dilution in a longer term. The exercise is targeted for completion in 2H2011,' it said.
Under the plan, Multi Sports It would issue up to 67.50 million new shares at an issue price to be determined later, which would be the underlying shares for the programme.'' The TDR will be offered to investors in Taiwan, it said. The ratio would be two TDR for every one underlying share.
The issue size is up to 135 million units of TDRs represented by up to 67.5 million underlying shares.
OSK Research said based on the illustrative issue price of 50 sen, the exercise will raise total proceeds of up to RM33.75m, of which RM2.3m will be used for the proposed exercise's expenses while the remaining portion will be used for on-going working capital purposes.
'Apart from creating a new listing platform for the group in Taiwan that could provide an alternative valuation for its shares, the proposed exercise will enhance Multi sports' profile in Taiwan where investors are perceived to be more familiar with Chinese companies.
'In addition, while Multi sports has sufficient internal funds to fund the expansion of its plant, which was completed in Dec 2010 as well as working capital requirements, the proposed exercise will also provide Multi sports with easier future access to the Taiwanese capital market,' it said.
OSK Research said the listing of the TDRs on the TWSE will also give Taiwanese investors an opportunity to acquire a shareholding in the company and hence diversifies the group's shareholder base.
'Upon completion of the exercise and assuming the issuance of the 67.50 million underlying shares, our ex-target price is reduced to 76 sen versus the cum target price of 87 sen, which still represents a 54% share price upside.
'While there will be EPS dilution, we think that the benefits of a potential rerating of the shares' valuation driven by the potentially higher valuation that may command in Taiwan, would outweigh the negative effects on an EPS dilution in a longer term. The exercise is targeted for completion in 2H2011,' it said.
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