News  As of 20th of November, the acceptance level for the unconditional take-over offer by CENSOF for Time Engineering Bhd (TEB) stood at 45.06% of total ordinary shares.

 In other words, the offers merely received 0.03% or 207,600 shares from TEB shareholders.

 To recap, CENSOF has tabled a cash offer price of RM0.20/share for TEB’s remaining outstanding shares.

Comments  The lacklustre response from the minority shareholders seems to echo our view that the unattractive offer price is very much likely a technical GO.

 In line with CENSOF’s intention to maintain the listing status of TEB, the low acceptance level suggests a high chance of TEB retaining its listing status post offer.

 We have earlier highlighted (at 13-Sep-13) that our CENSOF’s target price will be upgraded to RM0.88 based on unchanged FY14 PER of 15.5x over a higher net profit forecast of RM22.2m (from the current estimate of RM15.4m that based on the existing activities), should the proposed TEB’s acquisition to be concluded by end-CY13.

 To recap, we believe that the proposed acquisitions will not only allow the group to expand its business but also provide leverage on TEB’s resources and infrastructure to create synergistic benefits, and thus, raising both Censof Group and TEB Group to the next level.

Outlook  Our optimistic view on CENSOF’s long-term prospect remains unchanged underpinned by: (i) the potential influx of GST-compliance accounting system upgrade and training services demand from its existing 80 plus government agencies before the official implementation of GST in Apr-15, (ii) continued projects/contracts flow from various government agencies for its FMSS project, and (iii) potential massive synergistic benefits that could be created for CENSOF and Time Engineering Bhd (TEB) post acquisition.

Forecast  Our FY13E and 14E earnings forecasts remain unchanged.

Rating Maintain OUTPERFORM

Valuation  We maintain our TP of RM0.610 based on unchanged targeted FY14 PER level of 15.5x. Our Censof target price will be raised to RM0.88 should the proposed TEB’s acquisition to be concluded by end-CY13.

Risks to Our Call  Delay in projects revenue recognition.

Source: Kenanga