According to StarBiz, shareholders collectively holding 52.1% of Med-Bumikar's outstanding shares have voted in favour of the proposed sale of 50.1% stake in MBMR to UMW. We believe the offer price of RM2.56 per share is unattractive as it is lower than our existing target price of RM2.70/share and MBMR’s NTA at RM3.68/share. Maintain BUY on MBMR with unchanged TP of RM2.70.

NEWSBREAK

StarBiz reported that shareholders of Med-Bumikar Mara Sdn Bhd (MBM), who collectively hold 52.1% of the outstanding shares, have voted to sell its 50.1% stake in MBM Resources Bhd (MBMR) to UMW Holdings Berhad (UMW), subject to certain requirements and conditions during an EGM convened on 30 April 2018. It was reported that MARA, Looi family and Wong family were in favour of the disposal decision.

In addition, MBM’s shareholders also suggested the board to form a task force committee to negotiate with UMW to gain best interest of the company.

HLIB’s VIEW

Unattractive takeover offer. We believe that the offer price of RM2.56/share undervalues MBMR’s assets and potentials. The price is lower than our existing target price of RM2.70/share and MBMR’s Net Tangible Asset value of RM3.68/share. We would advise MBMR’s shareholders not to accept the offer price of RM2.56/share in the event UMW extend its takeover offer. The offer price values Perodua only at 9.5x 2017 PER, undermining Perodua’s strong presence in Malaysia given its 35% market share in 2017 and 41.1% market share in 2018 YTD. Recall that UMW made an offer to MBM to acquire combined stake of MBMR for RM2.56/share in cash on 9 March. The group also proposed to acquire 10% stake in Perodua from PNB Equity Resources Sdn Bhd (PERC).

UMW extended the offer timeline. UMWH reiterated that it will not budge from the existing offer price for MBMR. UMWH has again extended its offers for MBMR and PERC by six months to 31 October 2018 to enable parties to deliberate on the offers.

Daihatsu not in favour of takeover. We note that UMW will still need to acquire consent from Daihatsu Motor Co Ltd of Japan before the motion can be passed. Daihatsu Motor was not in favour of any changes in the shareholding structures in Perodua. Daihatsu Motor Co Ltd currently holds 20% stake in Perodua. If UMW is successful in fully acquiring MBMR and 10% stakes in Perodua from PERC, UMW will increase its stake in Perodua from its current 38% to 70.6%. Daihatsu Motor Co Ltd currently holds 20% stake in Perodua.

Forecast . Unchanged.

Maintain BUY, TP: RM2.70 . MBMR is expected to leverage on sustainable sales of Perodua in Malaysia (as well as opportunity for export market). Perodua has invested into major manufacturing facilities for engine (with Daihatsu) and transmission (with Akashi Kikai and Daihatsu) to improve its cost structures and support its long-term growth. Furthermore, OMI has started to show positive signs of turnaround in FY17. Maintain BUY on MBMR with unchanged TP of RM2.70, based on 20% discount to SOP.

Source: Hong Leong Investment Bank Research - 2 May 2018