Summary

• Emergence of new shareholders via DBT. On 17 January 2024, Dato' Seow Gim Shen (Dato' Seow), Metaco Asset Holdings Sdn Bhd (Metaco) and Bemas Holdings Sdn Bhd (Bemas) (Joint Offerors) had collectively acquired an aggregate of 92.3m ordinary shares or 53.3% of the total issued shares in REXIT from 3 existing shareholders of REXIT namely (i) Rexit Venture Sdn Bhd, (ii) Global Hartabumi Sdn Bhd, and (iii) Datuk Chung Hon Cheong for a total cash consideration of RM78.4m or RM0.85 per REXIT share via direct business transactions (DBT).

• Mandatory Take-Over Offer. Given the acquisition of more than 33% of total issued shares, the Joint Offerors will extend an unconditional mandatory take-over offer to acquire all the remaining 80.9m REXIT shares, representing 46.7% of the total issued shares of REXIT not already held by the Joint Offerors for a cash offer price of RM0.85 per share. Meanwhile, the Joint Offerors intend to maintain the listing status of REXIT.

• Information on the Joint Offerors. Dato' Seow serves as the Chairman of the Board of Titan Pharmaceuticals, Inc., a public company listed on the NASDAQ stock exchange (USA). Besides, he serves as chairman and directors in many IT and software services companies covering domestic and overseas businesses. Meanwhile, Metaco is an investment holding company with 3 shareholders, namely Kong Chien Hoi, Leow Kian Yong and Chan Chau Loong. The principal activity of Bemas is investment holding, and there are 4 shareholders, namely Chung Ching Chi, Chong Yoke Siang, Chong Siew Yoong and Chung Yoke Seng.

Valuation & Recommendation

• M+ Online View. Based on the FY23 earnings, the offer price of RM0.85 suggest an acquisition P/E ratio of c13.3x. Meanwhile, the acquisition P/E ratio based on FY24 earnings of RM11.4m will stood at c12.9x. In terms of P/B ratio, the offer price of RM0.85 indicates a P/B of 2.8x. We opine this offers presents an opportunity for the shareholders to take profit in light of potential uncertainties surrounding REXIT’s long term outlook after the departure of the previous shareholders, while pending for guidance from the new shareholders.

• Forecast unchanged. We maintained the earnings forecasts at RM11.4m and RM12.0m for FY24f-25f.

• Downgrade to SELL with unchanged TP at RM0.925. Given this take-over offer, and the recent rally towards RM1.05, we downgrade to SELL (from HOLD) we believe the current share price premium towards the offer price of RM0.85 and our target price of RM0.925 will present an opportunity to exit.

Source: Mplus Research - 30 Jan 2024