News  To recap, CENSOF had on 12th of September entered into a conditional share sale and purchase agreement (“SSA”) with Khazanah Nasional Bhd to acquire 45.03% or 349,112,731 shares of RM0.20 each in TIME Engineering Bhd (“TEB”, NOT RATED) for a cash consideration of approximately RM69.82m.

 Yesterday, CENSOF was granted approval from Bursa Malaysia to proceed with the takeover offer within two

months from the completion date of the acquisition.

 In addition, CENSOF also received concurrence from Securities Commission Malaysia that the offer would not result in a significant change in the business direction or policy of CENSOF upon the acquisition.

Comments  We believe the MGO is very much likely a technical GO as we understand management intends to maintain the listing status of TEB, based on the recent conversation with management. Furthermore, we believe the proposal is unlikely to be accepted by TEB’s shareholders as CENSOF’s offer price of RM0.20 is way too low compared to TEB’s current share price of RM0.27.

 Upon completion of the proposed acquisition, CENSOF will emerge as the new controlling shareholder in TEB with 45.03% equity interest. Under the Malaysian code on Take-Overs and Mergers, CENSOF will be obliged to extend a conditional MGO (with the conditional acceptance of >50% of the total voting shares of TEB) to the shareholders of TEB at a cash offer price of RM0.20/share.

 Our positive view on the proposed acquisition remains unchanged where we believe massive synergistic benefits could be created for both parties. Meanwhile, should the proposed acquisition be concluded by yearend, the enlarged CENSOF's forecast net profit for FY14 would increase to RM22.2m from the current forecast of RM15.4m. This will boost our target price to RM0.88 based on the above-mentioned targeted FY14 PER of 15.5x.

Outlook  We believe CENSOF’s long-term outlook remains encouraging, underpinned by (i) potential catalyst from GST development in the upcoming 2014 budget and (ii) consistent projects/contracts flows from various government agencies.

Forecast  Our FY13E-FY14E earnings remain unchanged.

Rating Maintain OUTPERFORM

Valuation  We maintain our TP of RM0.610 based on unchanged targeted FY14 PER level of 15.5x.

Risks to Our Call  Delay in projects revenue recognition.

 Lower-than-expected contract wins.

Source: Kenanga