Bonia has proposed a 1-for-1 bonus issue,  followed by a 1-into-2 share split  on  completion  of  the  bonus  issue.  We  are  positive  on  the proposals as the bonus issue and share split will improve the  stock’s liquidity  and  affordability.  Post-deal,  our  ex-all  FV  will  be  adjusted  to MYR1.20. Maintain NEUTRAL, with our FV unchanged at MYR4.80.

• 1-for-1 bonus issue. Bonia has proposed a 1-for-1 bonus issue of up to 201.6m  bonus  shares,  which  will  enlarge  its  current  share  base  to 403.1m  from  201.6m.  The  bonus  issue  will  be  capitalised  from  the group’s share premium and retained earnings.
• 1-into-2  share  split.  The  group  also  proposed  a  1-into-2  share  split upon  completion  of  the  proposed  bonus  issue.  Post  share  split,  the issued  and  paid-up  share  capital  of  the  company  will  be  MYR201.6m, comprising 806.3m subdivided shares.
• Ex-all  FV  is  MYR1.20.  We  believe  the  deal  will  help  to  improve  the stock’s trading liquidity and marketability in the long run.  The proposals are  expected  to  be  completed  by  3QCY14,  and  the  theoretical  ex-all price is MYR1.23, based on the stock’s last closing price of  MYR4.90. Post-deal, our ex-all FV will be adjusted to MYR1.20.
• Maintain NEUTRAL. We leave our earnings estimates untouched.   Our FV remains at MYR4.80, based on 14x FY15 EPS. The 14x target P/E is based on its 1-year historical mean P/E. Maintain NEUTRAL as the stock is currently trading at  a 16x forward P/E, which is at the higher end of its historical P/E band.  However, in the short term, investor sentiment might be buoyed by the latest proposals.

Source: RHB