INVESTMENT HIGHLIGHTS

• Proposed to issue 2 bonus shares for 10 existing shares

• Proposed 1 free warrant for every 10 existing shares

• Exercise a sweetener to existing shareholders

• Maintain NEUTRAL with TP of RM2.54 (Ex-TP of RM2.12)

Proposed to issue 2 bonus shares for 10 existing shares. Daibochi has announced a bonus issue that involves issuing two bonus shares for every 10 shares held. This will enlarge its share base to 327.9 mil shares. Post the bonus issue, our ex-TP will be RM2.12.

Proposed 1 free warrant for every 10 existing shares. The company also announced the issuance of one free warrant for every 10 shares held. It will list up to 27.32 million free warrants concurrently with the bonus issuance. Illustrative exercise price for warrant is RM2.50 and the tenure is 5 years.

Exercise a sweetener to existing shareholders. We are positive on the corporate exercise as we expect improvement in trading liquidity.

Maintain NEUTRAL with TP of RM2.54 (Ex-TP of RM2.12). We maintain our earnings estimate for FY17 and FY18 as Daibochi’s fundamentals are unchanged. Hence, we maintain our TP of RM2.54 (Ex-TP: RM2.12) based on the Dividend Discount Model (DDM).

Source: MIDF Research - 4 Apr 2017