• Ayala Land entered into conditional SPA to acquire 17.24% shares owned by Tan Sri Dato’ Sri Goh Ming Choon raising its stake to 50.19% in MCT.

• Should the transaction turns unconditional, Ayala Land is obliged to extend mandatory take-over for the remaining shares at the same price of RM0.88/share.

• We view this offer as fair given the weak property market outlook. The offer price also works out to be 8.6% above our RM0.81/share TP.

• We currently have a HOLD recommendation on MCT with an RM0.81/share TP which is based on mid-cap property stock’s blended historical PER and PBV of 12x and 1.2x respectively for FY18

Ayala is acquiring major shareholding

Ayala Land, MCT’s largest shareholder, entered into a conditional share purchase agreement (SPA) with the second largest shareholder, Tan Sri Dato’ Sri Goh Ming Choon (Barry Goh), on 2 Jan 2018, for the purchase of 230 million shares of MCT shares held by Tan Sri Dato’ Sri Barry Goh for RM202.5m. This works out to be RM0.88/share for an additional 17.24%, raising Ayala Land’s stake in MCT to 50.19% (from 32.95%). The SPA is conditional on Bursa allowing the 51% of the cash consideration to be paid in tranches.

Mandatory general offer to be extended

Should Bursa waive or Ayala Land proceeds as per the SC regulations for the cash consideration, Ayala Land is then obligated to extend the mandatory general/take-over offer for the remaining shares it does not own to the rest of MCT’s shareholders at RM0.88/share. However, Ayala has clarified that it already received exemption to extend mandatory take-over for holders of ICULS of MCT from Securities Commission.

Offer price is deem fair

The offer price of RM0.88/share (should the acquisition become unconditional) is 8.6% above both our TP and previous day closing price respectively. Hence, we deem it as fair amidst the soft property market.

Valuation and recommendation.

We retain our HOLD recommendation on the stock with target price of RM0.81 premised on the property stock’s mid-cap blended historical PER and PBV of 12x and 1.2x respectively for FY18. We think the downtrend in the share price has well reflected challenging market condition.

Source: BIMB Securities Research - 3 Jan 2018