Tuesday, December 20, 2011

YTL Cement falls below YTL Corp offer price in privatisation move

KUALA LUMPUR (Dec 20): Shares of YTL CEMENT BHD [] fell on Tuesday to below the offer price of RM4.50 made by YTL CORPORATION BHD [] in its privatisation exercise while sentiment was also dented by the overall cautious market.

At 3.37pm, YTL Cement was down 14 sen to RM4.46 while YTL Corp lost 8.0 sen to RM1.46 at 3.37pm.

The FBM KLCI fell 12.27 points to 1,465.51. Turnover was 1.20 billion shares valued at RM818.41 million. Declining stocks led advancers 440 to 285 while 267 counters were unchanged.

On Monday, YTL Corp extended a voluntary share exchange offer to YTL Cement shareholders on the basis of RM4.50 for each YTL Cement share, or 3.17 shares of 10 sen each in YTL Corp for every one ordinary share of 50 sen each held in YTL Cement.

RHB Research Institute said as at Nov 30, YTL Corp and its related parties owned a combined 52.8% in YTL Cement.

The research house said based on current stake held by YTLCorp and its related parties, the share exchange offer would likely go unconditional as the hurdle rate is just to achieve a more than 50% stake in YTL Cement.

'We believe some minority shareholders might take this opportunity to exit due to the low liquidity issues of YTL Cement shares. At the reference price of RM4.50, YTL Cement is valued at about 6.0 times EV/EBITDA on a fully-diluted basis, lower than Lafarge current valuation of about 8.5 times EV/EBITDA.

'We do note that minority shareholders will receive the more liquid YTL Corp shares, which then provides the more attractive exit route,' it said.

RHB Research said its indicative fair value remained at RM4.75 based on 10 times fully-diluted CY2012 EPS of 47.5sen, at 4.0 times multiple discount to its one-year forward target PER for the cement sub-sector to reflect YTL Cement's relatively low share liquidity.

'Due to the recent run-up in share price and limited upside to our fair value, we hence downgrade our recommendation on YTL Cement to Market Perform. In the near term, we believe share price of YTL Cement is more likely to track YTL Corp's share price due to this proposed share exchange offer. At current YTL Corp's share price of RM1.54, YTL Cement is effectively valued at RM4.88 based on the terms of the proposed share exchange offer,' it said.

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