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MCT’s RM1.2b price tag raises eyebrows

PETALING JAYA: The RM1.21 billion valuation of MCT Consortium Bhd in its proposed reverse takeover (RTO) of PN17 outfit GW Plastics Holdings Bhd has raised eyebrows.

According to an analyst, the valuation is equivalent to 26.7 times MCT’s net profit of RM45.24 million for the financial year ended June 30, 2013 and 11.5 times its shareholders fund of RM105.4 million as at June 30, 2013. The group’s net profit was RM35.44 million in FY2012 and RM6.72 million in FY2011.

“The valuation may be high in my view. Even big property developers like S P Setia Bhd is valued lower than that,” said the analyst.

The RM1.21 billion price tag is a 20% discount to the indicative market value of real properties held by MCT of RM1.51 billion, which was largely derived from its ongoing as well as future projects in USJ, Cyberjaya and Sepang.

The remaining and future estimated profits of these projects came in at RM1.13 billion or more, according to a filing with Bursa Malaysia.

MCT’s ongoing projects are Sky [email protected] with remaining profits of RM138 million, [email protected] with expected development profits of RM230 million and other projects with remaining profits of RM23.75 million.

Meanwhile, future projects such as One City Phase 3 on a 17.3-acre (7ha) land in USJ is expected to generate a development profit of RM530 million on a gross development cost of RM3 billion. Meanwhile, e-Green City, spanning a total 416.97 acres in Sepang, is expected to derive RM209 million in profits for the first two plots of land (out of a total of five plots).

Apart from ongoing and future projects, MCT also owns 169,174 sq ft of retail lots, a 13-storey hotel (243-room) and 126,915 sq ft of office lots at the newly built Sky [email protected] City in USJ, which is valued at RM299.25 million.  It also has a retail mall project called [email protected] City, which is almost completed, valued at RM110.75 million.

To recapitulate, GW Plastics last week proposed to acquire 100% of MCT for a consideration of RM1.21 billion, from MCT’s chairman Tan Sri Goh Ming Choon and managing director Datuk Seri Tong Seech Wi.

The acquisition, which is in essence a RTO by MCT, will be satisfied via the issuance of 1.08 billion new GW Plastics shares at RM1 each (post shares consolidation exercise) and RM135.16 million nominal value of 30-month zero coupon irredeemable convertible unsecured loan stocks (ICULS) to the vendors.

Both Goh and Tong will end up with 700.47 million shares and 377.18 million shares, or 64.9% stake and 34.9% stake, immediately after the acquisition. Nonetheless, after the subsequently placement of shares and proposed bumiputera issue by GW Plastics, as well as the restricted offer for sale (ROS) by Goh and Tong, the duo will see their stakes reduced to 602.2 million shares (43.6%) and 324.26 million shares (23.5%) respectively.

Nevertheless, Goh and Tong can still increase their stakes by converting the ICULS.

After the announcement on the RTO was made last Thursday, GW Plastics’ share price dropped by about 15% to 64 sen the next day. Nevertheless, regardless of the RTO by MCT, GW Plastics’ current minority shareholders can still receive a capital repayment of 61 sen per share, from the proceeds of the sale of the company’s packaging businesses to Scientex Bhd that was completed in January last year.

Based on its financial results for the nine months ended Sept 30, 2013, GW Plastics’ net profit stood at RM74.92 million or 31.8 sen per share. However, most of the earnings came from the RM71.5 million gains on the disposals of its packaging businesses to Scientex.

According to the analyst, GW Plastics’ PN17 status is not because it is under financial duress, but rather because it is a shell company after disposing of its core businesses to Scientex in January last year.

“This is not a rescue of a financially stressed company by another company. GW Plastics just basically needs a core business for it to be lifted out from the PN 17 status, following the disposal of its packaging businesses last year to Scientex,” he said.


This article first appeared in The Edge Financial Daily, on January 13, 2014.

 

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