SCIENTEX PACKAGING (AYER KEROH) BERHAD

KLSE (MYR): SCIPACK (8125)

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Last Price

2.19

Today's Change

0.00 (0.00%)

Day's Change

0.00 - 0.00

Trading Volume

0

Overview

Market Cap

769 Million

NOSH

351 Million

Avg Volume (4 weeks)

1,890

4 Weeks Range

2.18 - 2.32

4 Weeks Price Volatility (%)

94.40%

52 Weeks Range

2.11 - 2.78

52 Weeks Price Volatility (%)

78.78%

Previous Close

2.19

Open

0.00

Bid

2.20 x 16,900

Ask

2.25 x 2,000

Day's Range

0.00 - 0.00

Trading Volume

0

Financial Highlight

Latest Quarter | Ann. Date

30-Apr-2022 [#3] | 10-Jun-2022

Next QR | Est. Ann. Date

31-Jul-2022 | 28-Sep-2022

T4Q P/E | EY

18.90 | 5.29%

T4Q DY | Payout %

1.06% | 20.12%

T4Q NAPS | P/NAPS

0.85 | 2.58

T4Q NP Margin | ROE

5.54% | 13.66%

Company Profile

Sector: INDUSTRIAL PRODUCTS & SERVICES

Sector: INDUSTRIAL PRODUCTS & SERVICES

Subsector: PACKAGING MATERIALS

Subsector: PACKAGING MATERIALS

Description:

Daibochi Plastic & Packaging Industry Bhd is a Malaysia based company engaged in the manufacturing and marketing of flexible packaging materials. It is a packaging solutions provider company. The group provides packaging solutions for applications like food, beverage, FMCG, pharmaceutical and industrial uses which includes confectionary, biscuits, coffee, dairy, shampoo, detergent, anti-static, and other related products. The company operates in principal geographical areas of Malaysia, Australia, and New Zealand. It generates the majority of its revenue from Malaysia.

Discussions
1 person likes this. Showing 50 of 636 comments

observatory

@rohank71, your past comments show you’ve participated in a few recent takeover stocks. You must be quite used to the procedures.

I agree it looks like the offer is not extended as there is no announcement which is required 2 days before the offer expiry. However, based on Malaysian Code on Take-Overs and Mergers 2016, a price revision is still possible, in theory at least. According to Rule 12.03, the offeror can announce a revised offer no later than 46th day from the date of offer document. After that the offer needs to be kept open for at least another 14 days.

https://www.sc.com.my/api/documentms/download.ashx?id=72152df0-c094-4f...

I shall assume this will not happen, and plan for the various post-offer scenarios accordingly. Will return to this point at another time.

Meanwhile I observed an interesting trade pattern before the market close today. Looking back at today transaction records, Daibochi shares were bought from sellers continuously at above RM2.70 for almost the whole day.

These were the last four transactions of the day.
16:40:19 PM 50,000 shares bought at RM2.71 to RM2.73
16:42:55 PM 3,000 shares sold to buyers at RM2.70
16:43:41 PM 2,000 shares bought at RM2.72
16:50:00 PM 3,000 shares sold to buyers at RM2.70

At 16:40:19 PM, the buyer snapped up 50k shares queued at RM2.71 and RM2.72, and reached RM2.73.

But 2 minutes before pre-closing, a seller sold just 3k shares at RM2.70. This was followed by buyer snapping up the 2k shares queued at RM2.72. But at 16:50pm closing, seller sold another 3k shares at RM2.70.

I was perplexed by the trade pattern. If I were the seller, my objective would be to maximize gain by selling at a higher price if possible. I would queue at RM2.72 or even RM2.71 given there were continuous buying interest throughout the day. Why the small quantity sales at RM2.70 which only happened just before market close? Not once, but twice! It had the effect of setting the market closing price at RM2.70 instead of RM2.72.

This might be a minor point. I'm just curious about the psychology behind.

2021-11-05 22:42

EVEBITDA

an offer can only be revised if its kept open on the 46th day. total period for a GO is 60 days max. first window 21 days followed by 14 14 days 11 days. the last 11 days is just accademic. 45th day revision to give time for IA to produce revised opinion within 7 days.

2021-11-06 17:52

observatory

@EVEBITDA,
Thanks for the correction. I must have missed out the clause. This is what written on Code on Take-overs and Mergers, Rule 12.03 (3), “An offeror shall not revise a take-over offer or cause a take-over offer to be revised after the 46th day”

Adding to what you’ve explained that the offer must be kept open on the 46th day before it can be revised, doesn't it mean an offer can and only can be revised on the 46th day, and not on any other days? It seems very restrictive.

BTW I have another question. Assume the current offer expires by Nov 8 as scheduled, will the Offeror be obliged to pay the difference to original offerees who have already accepted, should the Offeror later acquire from open market or through another GO at an even higher price than RM2.70? What are the conditions involved?

2021-11-06 20:10

EVEBITDA

a revision in offer can be made anytime before the 46th day. once offer is closed the offeror cant buy above the offer price dor 6 month. and normally no offerors will make another offer within 12 months... or they may have another game plan.

2021-11-06 20:29

observatory

“once offer is closed the offeror cant buy above the offer price dor 6 month”

But this wasn't the case in Felda's offer for FGV. In this case the offer posting date was 12-Jan 2021. The offer at RM1.30 was extended three times up to 15-Mar.

Source:
https://www.bursamalaysia.com/market_information/announcements/company...

FGV together with its PACs only managed to acquire about 80% shares. FGV returned to buy in the open market as early as 19-May. Share price chart shows FGV was paying at higher prices than its original offer of RM1.30. The gap between offer end date and open market purchase was only about 2 months.

Source:
https://www.bursamalaysia.com/market_information/announcements/company...

I haven’t read about FGV having to pay the differences to offerees who had accepted its offer at RM1.30 earlier. Perhaps there is no such restriction and obligation in the first place?

2021-11-06 20:54

EVEBITDA

12 Jan to 15 Mac is the 60 days. yes they can buy below or at offer price.. not above. its a SC rule not to buy above the GO price. its no more abt compensation but fine and or jail term to the offeror

2021-11-06 21:42

EVEBITDA

my explanation earlier is on the basis of buying above the offer price... at or below offer price the offeror can freely buy anytime.

2021-11-06 21:43

EVEBITDA

am sure Scientex will have their plan on whats next and hence the decision not to extend the offer any further. there is no extra cost to extend and yet they decided not to extend.

2021-11-06 21:46

observatory

“yes they can buy below or at offer price.. not above. its a SC rule not to buy above the GO price”

I understand your point. But as you may check the FGV price chart below, since the RM1.30 offer ended on 15-Mar, FGV share has been traded above RM1.30 for considerable time.

https://klse.i3investor.com/servlets/stk/chart/5222.jsp

Below is the first out of the many filings on Felda shareholding changes since offer closed on Mar 15.

https://www.bursamalaysia.com/market_information/announcements/company...

As disclosed, on 19-May Felda acquired 4,107,200 shares in the open market. On that day FGV share was traded between RM1.36 and RM1.39, which was clearly above RM1.30 offer price (In fact should the 3 sen dividend which went ex on 17-Mar be considered, Felda should have been prohibited to buy at above RM1.30 – 3 sen = RM1.27)

Felda clearly paid above offer price in just a little over 2 months after its offer expired!

I know the rules dictate that offer price cannot be lower than past purchase price by itself or its PACs in the last 3 (or 6?) months before the offer. However is there a similar rule that prohibit purchases at higher price in the subsequent 6 months?

If so it would be quite foolish of Felda to commit such an offence. This is a large GLC with access to good advisers. Besides shareholders who had accepted its offer at RM1.30 just 2 months ago could be crossed and complain to SC!

2021-11-06 22:29

EVEBITDA

very intersting ... now I am concerned if I missed out anything understanding SC rules. tq for highlighting the above and I am too learning.

2021-11-06 22:54

iknownuts

Check the volume on 19 may. All i can say is, not all companies are built the same, u can have the brightest ppl to advise u, but u can still make admin mistakes/think u r the smartest/most influential/most (fill in blank yourself)….

Also, just cos u know someone robbed a bank (and its illegal) does not mean everyone else will rob the bank and flaunt with the rules

This entire acquisiton by sci is very interesting, and there are a lot more drama to unfold tmr and the coming months. Getting my popcorn bucket ready

2021-11-07 09:54

EVEBITDA

@observatort.. Para 21.02 of the takeover code prohibits buying shares above the offer price. looks like Felda has breached the rule. an email may be sent to SC at aduan@seccom.com.my

2021-11-07 09:58

EVEBITDA

they are quite responsive.

2021-11-07 09:59

EVEBITDA

however note 21.02 also says can buy provided its not a pre arranged transaction. a loop hole in the spirit of the code.

2021-11-07 10:22

Ttw570501

Thank for your response I think l can learn a lot from you

2021-11-07 12:20

observatory

@EVEBITDA, you’re familiar with the rules! Haha, you've even provided the email to aggrieved FGV shareholders to complain if they believe they have a case. But I've never owned FGV as I'm not a fan. I only look at FGV now to learn some useful lessons.

If you check all the Felda’s shareholding changes in the 6 months after its offer expiry, i.e. Mar-16 to Sep-15, they made multiple acquisitions. Most transactions made in Jun to Aug period could be done at RM1.30, as the chart clearly showed a price floor at RM1.30 then before share price shooting up by end Aug.

But Aug 30 acquisition seems to be above offer price again. Cannot rule out multiple admin mistakes, but there could also be legitimate reasons (or loopholes depending on POV), like the “on-market transaction which is not pre-arranged”. Not sure what it means.

BTW it’s funny to note that FGV shareholders who didn’t sell during the offer period seem to enjoy the RM1.30 “Felda’s put” thereafter, while pocketing the previously mentioned 3 sen dividend.

Not sure what is Scientex’s intention. Of course there could be surprises. But there could also be a more mundane possibility.

As of Nov 3 it has only acquired 71.78% of outstanding shares. Even if it acquires and converts 100% of outstanding warrants (ignoring the fact that Apollo and Samarang have acquired a sizeable quantity), its maximum ownership is only 73.95% of the enlarged share base. It could try forcing the public spread to go below 25% but that could not force a delisting. For example Felda and its PACs have controlled 80+% shares but FGV shares continue to be traded actively. It only adds administrative work for Daibochi management, which indirectly hurt shareholders’ interest including the largest one.

Given the dwindling volume of shares Scientex could possibly acquire as time goes on, it is unlikely to get enough to make a difference in the next 14 + 11 = 25 days. May as well just give up and wrap up the exercise now. If it wishes it could step back to the market to buy at RM2.70 later; and negotiate with those funds in the future given it will need to fork out less money in the next round after pocketing 10% shares at mere RM2.70 earlier.

The arrangement will also serve long term minority shareholders’ interest as they don’t want to sell out at current price, and instead choose to stay on with Daibochi’s growth and let its future business fundamentals to determine the return. After all, Daibochi is a multi-ten bagger stock since its listing. Would be a shame if it stops performing after Scientex came in (so far no such sign).

Of course the above is just one scenario based on deduction. I also have my popcorn ready for any surprise on Monday.

2021-11-07 13:14

Zackmeiser

I still think its worth at least rm3. Keeping mine.

2021-11-07 16:52

observatory

Let's think aloud what a rational investor may do on Monday.

Scientex offer expires at 5pm Monday. So first step is to check for Bursa announcement before 9am and during the midday break. There is no need to react to any “surprises”, assuming there is any. Even if there is a revised offer, SC rules dictate a minimum 2 week extension of offer. This provide enough time to watch how fund managers respond before retail investors chart their next step.

On the other hand, say for whatever reason Scientex suddenly announces it has acquired over 90% shares from current 71.78%, it is almost certain to acquire the remaining shares. And SC rule dictates it has to be done on the same term, and can be compelled to do so if necessary. So again, no rush.

Now assume no “surprises” after Monday noon break. It means there is no more price revision. Shareholders and warrant holders who have accepted Scientex offer will get their RM2.70 and RM0.32 respectively in due source, no less, no more. Whatever future development will have nothing to do with them. As discussed earlier, these offerees will not be compensated on differences should Scientex acquires at higher price say 6 months later.

If there is no offer revision, the risk-reward will be tilted against remaining warrant holders. A rational warrant holder may choose to accept Scientex’s offer. They may do so online at https://tiih.online/ in the afternoon but before 5pm closing. Make sure they have registered an account with Tricor.

Anyone who wants to speculate that Daibochi warrant price can go higher before expiry in Jun 2022, on the premise of a higher price in mother share during the next 8 months, may be better off getting RM0.32 from Scientex first, and only later buy whatever warrants still available after Monday. Given Scientex offer for warrant is more favorable than mother share, the warrant price is unlikely to hold after the offer expiry. I feel that speculators may get it cheaper in the future.

In fact I would not be surprised if Samarang, and even Apollo which has acquired warrants possibly for defensive reason, may choose to dump their warrants to Scientex just before closing. After all the purpose is already served. Defense is no longer necessary given Scientex is far away from getting to the 90% mark. It may be better to exchange for some capital from Scientex to either lower their Daibochi’s holding cost, or buy more Daibochi shares later.

As for short term shareholders with a horizon less than a year, they may either hold on for price appreciation hoping that the next 4 quarter results improve along with economy recovery, or to sell to buyers at above RM2.70 assume the buying interest is still there, just like last Friday.

But for long term shareholder like me, I have never intended to sell at RM2.70 level in the first place. The move by Scientex has only reinforced my conviction on Daibochi’s prospect. More importantly, Scientex’s move suggests that it may have a strategic plan to consolidate Daibochi first and later list its entire plastic division at a higher valuation. This will offer strategic flexibility and get rid of any potential conglomerate discount. So I expect Scientex to return when time is ripe.

With such knowledge I'm prepared to top up the shares should it drop back to pre-offer level. I trust Scientex’s insight! Rather than taking the opposite side on a trade by selling to Scientex, it's better to invest alongside with it, together with other long term funds.

2021-11-07 17:55

observatory

A minor point. Daibochi has a dividend policy “to distribute not less than 30% of the Group’s normalised reported annual net profit attributable to shareholders”.

Unaudited FY21 results show that EPS is 14.37 sen. Therefore the minimum dividend per share = 30% * 14.37 = 4.31sen.

So far it has only announced a 2 sen dividend in Q3. I believe it has not announced further dividend in order not to complicate the takeover exercise.

Assume the exercise is over by tomorrow, may remaining shareholders expect a minimum DPS of 4.31 – 2 = 2.31 sen?

2021-11-07 20:11

EVEBITDA

well said @ observatory. thank you and i have learnt alot from u.

2021-11-08 01:10

observatory

@EVEBITDA, you’re too humble. This is just the opinion of a retail investor. It seems that you’re an industry veteran. It’s reassuring when you didn’t find flaw in the logic.

2021-11-08 08:04

Jibbie88

accidentally bought more shares kekeke

2021-11-08 12:04

Zackmeiser

If share dropped to pre 2.2 level just topup cuz u know its worth 2.7 from insider valuation (scientex). Although it might take sometime to reach that. That said, packaging industry is booming with new norm people online shopping. Good counter to invest. Not sure if its for traders.

2021-11-08 16:12

observatory

@Zackmeiser, agree, but buy in stages. Recall the speculated kitchen sink that didn’t happen in last quarter. There is still a chance that management may impair Daibochi Myanmar. In last quarter report they said the “market uncertain and volatile”.

Page 98 of 2020 AR shows the book value is about RM25m, which is worth about 2 quarters of profits. But impairment is just an accounting treatment. It affects accounting profit but not real cash. Should they do impairment in future quarter it could present buying opportunity.

Anyway, if share price is low enough it could also lure long term investors who have earlier sold due to fear of delisting to buy back their shares. The announcement is just out. Scientex owns 71.789% as of last Friday.

2021-11-08 17:20

Zackmeiser

71% is far from 90%. I am sure scientex will come back with better offer. Its rm3 for me. Nothing less.

Any drop in price means buying opportunity. Base price is as we all know rm2.7.

2021-11-08 20:38

observatory

Can shift the focus back to Daibochi business fundamentals. It’s in Scientex's interest that the company prospers. We just need to watch that it gets a fair deal from related party transactions.

Given its client portfolio and product innovation like sustainable packaging, the investment in organic & inorganic growths, the company intrinsic value can only grow over time. Any future interest from Scientex is nice to have. When it arises the company can be revalued based on the prevailing conditions. Most importantly a good company long term share price will be supported by its fundamentals.

2021-11-08 23:55

gemfinder

Luckily take bqck money at 2.70. Wil drop back to 2.20

2021-11-09 07:49

Ttw570501

Lower price never mine most lmportant don’t let scientex buy up 90% share maybe Apollo and samarang can help we are not intending to sell

2021-11-09 10:53

oldchinaman

"ITCHYLEG Due to the Budget is unfavorable to share market. I have no choice to accept 1.5 million warrants offer yesterday. balance 500k units in hand
02/11/2021 10:12 PM"

ITCHY . You make the right decision

2021-11-09 22:34

ITCHYLEG

I accepted the offer of my balance 590.30k last day (8.11.21)
the payment will receive on 18.11.21. The lst batch payment is on 11.11.21

2021-11-09 22:57

ITCHYLEG

My cost is 32+c
I bought on 14.9.21 (lst day of offer) & 15.9.21
Loss few thousands Riggit

2021-11-09 23:01

observatory

The return of buy and hold investors

https://www.tradingview.com/chart/RXOKEilS/?symbol=MYX%3ADAIBOCI

2021-11-10 00:01

Jibbie88

@observatory please publish the chart.

2021-11-10 01:12

iknownuts

@itchyleg, what changed your mind? U seemed to already have a game plan earlier.

Posted by ITCHYLEG > Nov 9, 2021 10:57 PM | Report Abuse

I accepted the offer of my balance 590.30k last day (8.11.21)
the payment will receive on 18.11.21. The lst batch payment is on 11.11.21

2021-11-10 08:56

ITCHYLEG

Budget 2022: Stamp duty for share transaction rises to 0.15%, RM200 cap removed. KUALA LUMPUR (Oct 29): The government has removed the RM200 stamp duty cap on contract notes for trading of listed shares, and increased the rate to 0.15%, from 0.1%

Because of the above , i feel will have negative impact to the stock market

2021-11-10 09:48

keith188

Institutional shareholders

Top holders
Movers

Click or tap a row for details
Holder Shares bought Shares held
AIMS Asset Management Sdn. Bhd. +524.30k / +1.71% 31.23m
Samarang LLP +166.30k / +0.98% 17.21m
Public Mutual Bhd. +39.30k / +0.16% 24.00m
Amundi Malaysia Sdn. Bhd. 0.00 / 0.00% 500.00k
KAF Investment Funds Bhd. 0.00 / -19.19% 314.60k

Holder Shares sold Shares held
Manulife Investment Management (M) Bhd. -882.50k / -34.55% 1.67m
KAF Investment Funds Bhd. -74.70k / -19.19% 314.60k
Amundi Malaysia Sdn. Bhd. 0.00 / 0.00% 500.00k
Samarang LLP 0.00 / +0.98% 17.21m
RHB Asset Management Sdn. Bhd. 0.00 / 0.00% 30.00k
Data from 31 Dec 2020 - 01 Nov 2021

2021-11-10 10:02

ITCHYLEG

I received 480,010.00 from scientex this morning , they pay me back the transfer fee also rm 10.00

2021-11-11 11:51

oldchinaman

Good.........

2021-11-11 14:32

ITCHYLEG

股神巴菲特说过的一段话:“我的一生中,从未遇见一位没亏过钱的富人,却遇见许多什么都不敢干而从未亏掉一毛钱的穷人。

敢投资的人才拥有成为富人的机会。

不敢投资的人,虽然没有亏过钱,但也注定不会赢钱。”

2021-11-13 01:03

iknownuts

So fast popcorn come already…

Change name, change div policy…

https://gfycat.com/uk/heartfeltignoranticelandgull-this-is-gonna-be-go...

2021-11-19 18:39

observatory

Haha, Scientex Packaging. I didn’t expect Scientex to show its cards so soon.

Gone are the lame excuses for the privatization. Daibochi is indeed central to Scientex’s plan such that it will now bear its name. This is in line with my earlier suspicion that Scientex wants to consolidate Daibochi with its remaining packaging business first, and later spin off the entity through another IPO. Due to the failure of its privatization plan, Scientex has probably been forced to re-sequence the order of execution.

Now Daibochi will get Scientex’s name. But it will be odd if other Scientex's packaging businesses do not come under the aptly named Scientex Packaging. So what does it tell us? This is Scientex’s way of saying the remaining 28% shares in the hands of Daibochi minority shareholders are valuable to them!

Fear not about the change in dividend policy. It has been changed once in 2018. After Scientex acquired control, the previous dividend policy of distributing at least 60% of net profits was reduced to 30%. The next three years were followed by aggressive expansion, and jumps in earnings and revenues. MPP acquisition and RM100 million expansion were funded partly by internal cash conserved after cutting dividends.

The need to further revise the dividend policy shows that Daibochi management still sees continuous business opportunity and the case for rapid expansion. That should be slap in the face for TA which has previously assumed Daibochi’s growth rate will decline to 2% after 2026!

Daibochi has registered an impressive ROE of 19% in FY2020, and a still impressive 16% ROE in the pandemic year of FY2021.

Given shareholders’ cost of equity is only 9.13% according to TA, Daibochi has returned almost 10% above the hurdle rate. I’m OK to forego short term dividends if management can continue to compound the retained earning at a near 20% return per annum.

Just let Scientex and Diabochi management run the show. We minority just sit down to enjoy. We know Scientex has a 72% interest and will make sure the management works hard and don’t drop the ball.

In case they don’t act fair, we minority have the privilege vote against resolutions where Scientex is barred from participating.

2021-11-19 21:14

observatory

The announcement says
~~
The proposed name, "Scientex Packaging (Ayer Keroh) Berhad" has been approved and reserved by the Companies Commission of Malaysia ("CCM") on 29 October 2021.
~~
https://www.bursamalaysia.com/market_information/announcements/company...

Look at the date. The approval was received on 29 Oct, while Scientex offer is still outstanding.

The application could have been submitted, and definitely planned much earlier than 29 Oct. This was most likely coordinated between Daibochi board and Scientex. Daibochi board couldn’t possibly go it alone without the prompt and support of Scientex to use its name.

But both of them did not reveal the information in the offer document nor various other announcements during the offer period. As I guessed earlier, they have a grand plan. But they didn’t tell minority shareholders the full story.

The plan is probably best executed after Scientex has already privatized Daibochi. Unfortunately the privatization failed. Now Daibochi board has to seek shareholders’ vote on the name change. This time round the board better tell shareholders the complete story, and what is their game plan for the future!

2021-11-19 23:36

iknownuts

Scientex always change the name of its subsidiaries after acquiring them. Daibochi is already a couple years late.

If scientex wants to list their packaging biz seperately, they would have done it long time ago. Daibochi is only a part of their packaging business, wouldnt say its integral.

Many commentators always say scientex is not “investable” because of their lack of focus, ie borh a manufacturing and property company. well, its actually the twin turbo engine that is driving the company, its performance and its share price up. Those who doubt companies like this, just need to look at the biggest company in singapore, SEA limited. They own 3 distinct businesses and see how they are growing.

I sincerely hope those remaining holders of daibochi have diamond hands, with only 5% of the free float available now, it is already extremely illiquid. Wb no need to say, just pray something happens in the next 7 mths.

Ok back to my front seat chair.

2021-11-20 10:23

observatory

For every successful new economy company like SEA Limited, I can quote at least two other mult-business old economy companies that are not doing well or have broken up. Latest examples include General Electric, once the most successful company in the world, which has just announced a three-way breakup. So is Johnson & Johnson which will be split into two. More prominent examples closer to home include Sime Darby which has spinned off its property and plantation arms.

No one in the forum have doubted the past success of Scientex’s property cum packaging business. But whether it represents a good personal investment instead of flexibly investing into pure plays at respective sectors is debatable.

No one has also said that Scientex will not do well due to “lack of focus”. But any shrewd entrepreneur, which I believe Scientex’s PJ Lim is one, will want to develop and retain the OPTION of spinning off a minority stake of a CONSOLIDATED packaging business.

When the timing is right, why not list a 25% of the consolidated, vertically integrated packaging business at a premium to raise cash for the property arm? In fact every management who is responsible to their shareholders should develop such strategic option, only to be called upon when time is right.

This is where I find the disconnect of certain views in the this forum. They downplay the prospect and value of Daibochi. They praise the brilliance of Scientex management. But they sidestep the inconvenient contradiction on why a brilliant Scientex management may want to acquire 100% of Daibochi which supposedly is worth a lot less. Why never give credit to Scientex management for their strategic move when the credit is due?

It’s funny that people who have purportedly accepted Scientex offer continue to show concern for the remaining minority shareholders, albeit from the sideline. When Apollo, Samarang and Public Mutual which collectively own more than 22% of Daibochi shares are not worried about the reduced free float, I as a small potato long term shareholder is definitely not worried.

Unless the reminder is targeted at those funds. In that case this forum is probably the wrong channel. Better talk to the fund managers directly.

2021-11-20 11:43

Ttw570501

Support you observatory

2021-11-22 10:37

Investmon

wow, 30 years of building up the Daibochi brandname in the packaging industry just got wiped out in one fell swoop. Strange that Scientex management did not remove Greatwall brandname after the takeover. He must be very angry for not successfully taking over Daibochi. and you'd wonder what else would an angry person do to Daibochi, besides name change and dividend change. I think I made the right decision to just give all my small number of shares to Scientex at RM2.70.

2021-11-22 10:44

observatory

I don’t think the change of name is an emotional move. There are several clues that lend support to my reasoning.

First, we need to give credit to PJ Lim for growing Scientex into a great enterprise over the years. Successful entrepreneurs like him is unlikely to be distracted by petty revenges. Besides he should know his offer price is rather opportunistic. So couldn’t blame others for rebuffing his offer.

Second, shareholders with sentimental attachment to the Daibochi’s name are likely to be the descendants of the founders. They have already exited in 2018 by selling their stakes to Scientex. It’s hard to imagine Apollo, Samarang or Public Mutual being sentimental to the Daibochi name despite being long term shareholders. So if this is indeed a petty revenge it’s not hitting the right target!

Third clue lies in the date. As mentioned earlier the Scientex Packaging name has been approved by Companies Commission on Oct 29, while the takeover offer was still ongoing. The name change is probably planned well before the offer has been announced.

Forth, @Investmon you’ve just provided another clue by citing Great Wall. Scientex’s Great Wall subsidiaries are called Scientex Great Wall and Scientex Great Wall (Ipoh). By the same convention, Scientex should have renamed Daibochi as Scientex Daibochi.

By calling it Scientex Packaging it hints at a more central role. It implies Daibochi will become the vehicle for Scientex packaging business. But currently Daibochi is the smaller part of the entire packaging business. Such a prominent name seems inappropriate. Unless, of course, this is the precursor to more corporate activities in the future.

Fifth, although Scientex is famous in the packaging business, the name is associated with the upstream business as a prominent stretch film supplier. Daibochi is well known in the downstream converter business due to its long established portfolio of MNC clients. So the Daibochi name has intangible value that a valuation expert could actually put a figure on. There must be a compelling case based on a greater gain to justify writing off this intangible asset.

This is where we need to hear the full story from Daibochi Board. They should explain to all shareholders what is the game plan with all these moves, including the change in dividend policy. They need to come clean on their earlier endorsement of TA low valuation that assumes just 2% growth after 2026. It contradicts the new dividend policy which indicates desire to retain more earnings for investment, which in turn implies the Board seeing opportunities that can generate return above shareholders’ cost of equity.

If indeed the name Scientex Packaging hints at part of Scientex entities may come under Daibochi in the future, we need to know how Daibochi is capable to fund itself to acquire this larger beast.

Despite being a cash cow, Daibochi does not generate that magnitude of cash to take over Scientex multiple packaging entities. Purchase assets from Scientex in exchange of issuing new shares is a no no, as minority shareholders will veto. Funding through borrowing is risky as Daibochi becomes a highly geared. Or more straight forward, Scientex to acquire the remaining 28% shares in another offer in 2022, so that it can do whatever it wants with its entire packaging portfolio?

Those of you who have not sold your shares, let’s attend the AGMs and pose these questions. Although Daibochi directors are not in the position to explain on behalf of Scientex, hopefully from the way they answer we get a hint what could be coming.

2021-11-22 13:26

Investmon

@observatory, thank you for very insightful analysis. But why change the name to restrict it to a localized business, i.e. Ayer Keroh in bracket, if Scientex has the intention to make Daibochi bigger than it is? why not change the name to Scientex Packaging (Malaysia) Bhd or Scientex International Packaging Bhd. you may be right to forecast that Daibochi may take over part of Scientex entities (packaging business, right?), but Daibochi will not have a big enough balance sheet to acquire this larger beast. what do you think, whether Daibochi may do a rights issue to buy these huge assets? I doubt you can get much info from the Daibochi directors at the AGM, since the AGM is likely to be virtual.

2021-11-22 14:24

observatory

@Investmon, thank you for the good input. I agree the bracket in the name implies restriction. However, at the same time I also don’t see it as a petty revenge for reasons mentioned earlier. The date of CCM's approval shows that Scientex anyway want to change the name after privatization.

I also agree with you that Daibochi does not have the balance sheet to acquire Scientex’s packaging business. I cited other methods just to illustrate that the best route for Scientex still lies in privatization.

The hurdle in the remaining 28% shares may not be that high if it's a strategic move. Of course, I have no way of knowing what is the price the other three funds have sought. But in the meantime, it’s in everyone’s interest to make sure Daibochi continue to prosper. The privatization could be put aside and revisited later.

This is where I hope the Daibochi board could be candid in the upcoming AGM. If they are willing to explain in details about the company plan, and to assure minorities that they work for the interest of all shareholders, it will help restore the trust. A virtual AGM, while not ideal, is not a hindrance to sincere communication too.

But on the other hand, if they just assume they could bulldoze all proposals through with Scientex votes, they may find resistance on resolutions where Scientex could not vote.

There has been precedence. In 2019 after acquiring 77% of Malayan Cement from Lafarge, YTL Cement was too arrogant to assume Related Party Transactions resolution would be duly passed. The RPT was voted down. After the incident the board had to explain to institution minorities and arranged another vote a few months later.

https://www.theedgemarkets.com/article/minority-shareholders-block-laf...

Anyway it’s our rights and also duties as shareholders to raise relevant questions. Let’s look forward to the Daibochi Board being professional and responsible enough to provide the necessary clarity and assurance.

2021-11-22 16:38

observatory

Apparently this stock has fallen off inventors' radar. There has been no more posting in i3 forum since my last comment made seven months ago. The lack of interest mirrors the low liquidity. This is expected given Scientex has mopped up all the shares from short term investors. Whoever remain are long term shareholders who refuse to give up their holding without a fair price.

Since the end of privatization, Daibochi (now Scientex Packaging) share price has retraced about 15% from RM2.70 offer price to RM2.31. This is partly due to compressed margin as a result of time lag in passing cost increase to customers; and partly due to short term investors/ speculators giving up on this stock.

Interestingly the industry problem seems to hit Scientex share price even harder. The parent company share price has declined about 30% from 52w height of RM5 to RM3.48 today.

Another interesting development is today Scientex, Apollo and Samarang have announced that they have exercised all their warrants just before the warrant expiry. The exercise price was RM2.50, which was higher than the current mother share price at RM2.31. Given the low trading volume, they have no choice but to convert at a premium to avoid dilution.

After the warrant exercise, Apollo has in fact increased its shareholding from 9.54% as of Nov 2021 to 10.30% now. Samarang has increased from 5.26% to 5.40%.

Despite exercising 16.7 million warrants, Scientex has only managed to keep its holding unchanged at 71.90%.

https://www.bursamalaysia.com/market_information/announcements/company...
https://www.bursamalaysia.com/market_information/announcements/company...
https://www.bursamalaysia.com/market_information/announcements/company...

Another interesting fact is earlier Scientex has acquired the warrant at RM0.32. By paying another RM2.50 now, the effective price per share for Scientex is RM2.82, which is higher than its original share offer price of RM2.70. Not to mention that Scientex has also missed out the 5 sen final dividend paid on Jan 2022.

Altogether Scientex, Apollo and Samarang have paid an extra RM58 million in warrant exercise to defend their shareholding. They continue to see value in Daibochi. Clearly Scientex has not given up yet!

1 week ago

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