MB World’s shareholders which collectively owns 71.8% of equity interest announced the intention to undertake an unconditional voluntary take -over offer to acquire all the remaining ordinary shares at RM0.99 per share. We are rather neutral on the offer as the offer price of RM0.99 represents only a 1% premium to the 5-day VWAMP price of RM0.98. The price tag of RM0.99 translates to a P/B of 0.56x or a 75% discount to our estimated RNAV. Maintain HOLD with a lower TP of RM0.99 (from RM1.01) to reflect the offer price. As the offer price of RM0.99 is rather priced similar to our TP of RM1.01 (with only a 2% discount), we believe shareholders should accept the offer given the lack of earnings visibility and illiquidity of the stock. Our previous TP of RM1.01 was also based on a 75% discount to our RNAV estimates of RM4.04.

NEWSBREAK

MB World’s major shareholders which collectively owns 71.8% equity interest announced the intention to undertake an unconditional voluntary take-over offer to acquire all the remaining 44.4m ordinary shares in MB World not held, representing 28.2% of the total issued shares of MB World at RM0.99 per share. The ownership breakdown of the aforementioned shareholders comprises of KF Capital (70.2%), NgSinar (0.6%) and Ng Kok Boon (1%). All offer shares accepted will accrue to KF Capital and they do not intend to maintain the listing status of MB World on the Main Market of Bursa Securities. The offer will be made within 21 days from the date of this notice.

HLIB’s VIEW

Neutral on the news. KF Capital does not intend to maintain the listing status of MB World on the Main Market of Bursa Securities. We are rather neutral on the offer as the offer price of RM0.99 represents only a 1% premium to the 5 -day VWAMP price of RM0.98 and 5.9% premium to the last closing. The price tag of RM0.99 translates to a P/B of 0.56x or a 75% discount to our estimated RNAV of RM4.04.

Outlook subdued even before Covid-19. We note that MB World’s earnings visibility was rather thin as its unbilled sales only stood at 0.3x cover as of 4Q19. To make matters worse, the Covid-19 pandemic has made property launches and unbilled sales replenishment rather difficult in the near-term for the property sector.

Forecast. Unchanged pending further clarity on the company’s outlook. Nonetheless, there will likely be downward revision to our current forecasts given the current economic situation.

Maintain HOLD with a lower TP of RM0.99 (from RM1.01) to reflect the offer price. As the offer price of RM0.99 is rather priced similar to our TP of RM1.01 (at only a 2% discount), we believe shareholders should accept the offer given the lack of earnings visibility and illiquidity of the stock. Our previous TP of RM1.01 was based on a 75% discount to our RNAV estimates of RM4.04.

Source: Hong Leong Investment Bank Research - 16 Jun 2020