- Yesterday, JT International Bhd (JTI) announced that its parent and major shareholder, JT International Holding BV (JTIH) has revised its offer price for the remaining shares in JTI which it does not own (39.63%) to RM8.20/share or a total cash offer of RM849.9mil.

- JTI had, on 31 March 2014, received a conditional offer from JTIH to take the company private. We believe that the offer price was raised from the initial RM7.80/share in a bid to coax the shareholders to accept the offer. A news report earlier this month had highlighted that the acceptance level at the initial deadline of 12 May 2014 was only 8.55% as JTI’s shareholders were holding out for a higher price.

- However, we understand that since then, JTI’s other key shareholders have jumped on board. In a statement to Bursa, the group said that as of 21 May 2014, it has received an irrevocable undertaking to accept the revised offer from EPF (8.13%), KWAP (6.84%), Great Eastern Life Assurance (M) (4.73%) and PNB (3.94%).

- While significant (these holdings collectively make up 23.64% of total outstanding shares or 60% of the remaining shares not held by JTIH), it is still below the acceptance level for JTIH to delist JTI. JTIH needs to get a 90% acceptance of the shares it does not hold.

- In view of the higher offer price, we reiterate our recommendation for investors to accept the offer.

- The new offer price is at a 5.1% premium to its previous offer price of RM7.80/share and a 30.2% premium to its closing price prior to the offer announcement of RM6.30/share. It is also higher than our DCF-derived fair value of RM7.20/share.

- As we had noted previously, JTI had not traded at or above the offer price for the past 15 years (excluding yesterday’s close) and that trading volumes has been traditionally thin.

- Its all-time high was at RM7.39/share, achieved on 30 December 2011. Recent low for the stock was on 26 September 2011, at RM4.65/share.

- At RM8.20/share, JTI is valued at an FY14F PE of 16.4x. This is above our implied forward PE of 14.4x and the group’s 5-year mean PE of 11.5x.

- The acceptance date for the conditional takeover has been extended to 5.00p.m. on 5 June 2014. Those who have accepted the previous offer is entitled to receive the revised cash consideration.

Source: AmeSecurities