Dato' Seow Gim Shen, Metaco Asset Holdings Sdn Bhd (Metaco), and Bemas Holdings Sdn Bhd (Bemas) have acquired a total of 92.3mn ordinary shares in REXIT, representing 53.3% of the total issued shares from 3 existing shareholders namely Rexit Ventures Sdn Bhd, Global Hartabumi Sdn Bhd, and the group’s chief executive officer Datuk Chung Hon Cheong, for a total cash consideration of RM78.4mn or 85.0sen/share via direct business transactions.

As a result, it triggers a mandatory general offer (MGO) to acquire all the remaining shares at a cash consideration of 85.0sen/share. The offer is not conditional upon any minimum level of acceptance of the offer shares. Meanwhile, the joint offerors intend to maintain the listing status of REXIT.

Dato' Seow is a chairman and director of a few information technology and software services companies. On top of that, he is also the chairman of Titan Pharmaceuticals, a public company listed on the NASDAQ stock exchange. On the other hand, Metaco is an investment holding company with its directors and substantial shareholders being Kong Chien Hoi, Leow Kian Yong and Chan Chau Loong. Meanwhile, Bemas is also an investment holding company that is mainly controlled by Chung Ching Chi.

Our View

The offer price of 85.0sen/share implies an acquisition PER of 13.4x, based on REXIT's FY23 core earnings. Based on our FY24 earnings forecast of RM11.3mn, the PER would be around 13.1x. In terms of P/B, the offer price implies a P/B of 3.1x. Despite the offer price of 85.0sen/share being at a discount to our TP, we opine it will be an opportunity for investors to exit, especially with potential concerns on REXIT's long-term direction following the exit of the founder and largest shareholder.

Forecast

No Change to Our FY24-FY26 Earnings Projections.

Valuation

We maintain our TP of RM0.93 based on a target PE of 14.0x CY24F EPS. We downgrade our recommendation from Hold to Sell. We believe this could be an opportunity for investors to exit first, pending guidance and potential new business direction from the new owners.

Source: TA Research - 18 Jan 2024