Kenanga says RM2 MKH offer ‘not fair’ but recommends acceptance

PETALING JAYA (Sept 8): Kenanga Investment Bank Bhd has recommended that MKH Bhd shareholders accept Whitmore Holdings Sdn Bhd’s RM2-per-share mandatory takeover offer, despite assessing the offer as “not fair” on valuation grounds.

The independent adviser said the offer price is RM2.31, or 53.6%, below its estimated value of RM4.31 per MKH share based on a sum-of-parts valuation. MKH’s unaudited net assets stood at RM3.27 per share as at June 30.

Nevertheless, Kenanga assessed the offer as “reasonable”, citing factors including the premiums offered over MKH’s historical market prices, the stock’s relatively low trading liquidity and the absence of an alternative offer.

In a Bursa Malaysia filing on Monday (Sept 7), MKH said its non-interested directors concurred with Kenanga’s “not fair but reasonable” assessment and also recommended that shareholders accept the offer. 

The unconditional mandatory offer is being made by Whitmore, a wholly-owned subsidiary of Batu Kawan Bhd, through Maybank Investment Bank Bhd to acquire all remaining MKH voting shares not already owned by Whitmore and Batu Kawan for RM2 cash per share.

Why Kenanga says accept

Kenanga said its RM4.31-per-share estimate was derived using a sum-of-parts methodology, applying valuation approaches including discounted cash flow, revalued net asset value and net asset value to MKH’s various businesses.

However, it cautioned that much of the estimated value reflects MKH’s property development and plantation assets, which may not be readily or quickly converted into cash. Realising those values would depend on factors including property market conditions, regulatory approvals, funding availability and willing buyers.

The RM2 offer represents a 1.52% premium over MKH’s last traded price on Aug 5, the last trading day before the takeover notice was served, and premiums of between 1.54% and 28.65% over its five-day to two-year volume-weighted average market prices up to that date.

The premiums are substantially larger against prices before the takeover developments emerged. Compared with MKH’s last traded price on May 14 — before Bursa Malaysia Securities Bhd issued an unusual market activity query the following day — the RM2 offer represents a 76.99% premium, and premiums of between 81.26% and 103.21% over the five-day to two-year volume-weighted average prices.

Kenanga also pointed to MKH shares’ relatively low historical liquidity. Excluding May, June and July, when trading volumes were significantly above the normal trend, average monthly trading volume from August 2025 to July 2026 amounted to about 1.23% of MKH’s free float.

Listing at stake if holdings reach 90%

As at Sept 1, the latest practicable date of the circular, Whitmore, Batu Kawan and persons acting in concert collectively held 337.65 million MKH shares, representing 58.5% of the company’s issued shares excluding treasury shares.

Valid acceptances and open-market acquisitions disclosed from the commencement of the offer to that date totalled 43.43 million shares, or 7.5% of MKH’s issued shares excluding treasury shares.

Whitmore’s direct stake had risen to 50.9% following completion of its acquisition of a further 18.1% stake in MKH on Aug 10, after earlier acquisitions and open-market purchases.

If the aggregate holding of Whitmore, Batu Kawan and persons acting in concert rises above 75% but does not exceed 90%, Whitmore and Batu Kawan intend to maintain MKH’s listing. Should the offer result in MKH failing to meet the public shareholding spread requirement, they intend to work with MKH to rectify the shortfall within six months from the closing date, or such timeframe as may be allowed by the relevant authorities.

However, if their aggregate holding reaches 90% or more, Whitmore and Batu Kawan do not intend to maintain MKH’s listing and intend to procure the company’s withdrawal from Bursa Malaysia’s Main Market.

Kenanga said shareholders who are able to obtain a price above RM2, net of transaction costs, may instead consider selling their shares on the open market or through a direct business transaction.

It added that, as at Sept 1, MKH had not received an alternative offer for the offer shares, or any offer to acquire the MKH group’s business, assets and liabilities.

The offer is scheduled to close at 5pm on Sept 17, unless extended or revised.

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