Offer for Perduren ‘not fair but reasonable’

KUALA LUMPUR: Property investment company Perduren (M) Bhd’s majority shareholder TS Law Group Sdn Bhd’s bid to take over the company at RM1.10 per share was deemed as not fair but reasonable by independent adviser KAF Investment Bank Bhd.

“Based on a sum-of-parts valuation, which is our primary methodology in assessing the fairness of an offer, the offer is considered not fair, although the offer price represents a premium over the market price of Perduren’s shares,” said KAF in an independent advice circular released last Friday by Perduren in relation to the conditional takeover offer.

Based on the methodology, the offer price of RM1.10 represents a discount of 68 sen or 38.2% to a fair value of RM1.78 per Perduren share, it said, which does not reflect the company’s fair market value.

Nevertheless, KAF deemed the deal reasonable after taking into account Perduren’s fluctuating financial performance, low liquidity and poor dividend track record, and recommended that Perduren’s shareholders accept the offer.

“We are of the opinion that the rationale for the offer is reasonable as with no single shareholder having more than 50% control over the voting rights of Perduren shares, the ability of Perduren Group in improving its financial position and performance will be a challenge,” it said.

To recap, on Nov 26, TS Law — owned by Tan Sri Law Tien Seng and his wife Puan Sri Saw Geok Ngor — announced its intention to undertake a conditional takeover of Perduren at RM1.10 per share.

TS Law is Perduren’s largest shareholder with a 19.27% stake or 26 million shares. This is followed by Meridian Hectares Sdn Bhd and Casaviva Investments Ltd with 15.97% and 11.34% equity interest respectively.

TS Law is required to receive 50% acceptances for the offer to be valid, which means valid acceptances for 41.46 million offer shares, or about 30.73% of the issued and paid-up share capital of Perduren during the offer period.

According to the circular to shareholders, the rationale for the takeover is to allow TS Law to obtain controlling interest in the company and contribute to the group’s strategic direction. The offerors plan to maintain Perduren’s listing status.

The offer price of RM1.10 represents a 15.18% premium to the last transacted price on Nov 25, at 95.5 sen per share. Perduren closed at RM1.07 last Friday.

According to KAF, both revenue and profitability of the group have been fluctuating over the years, with revenue hitting a high of RM29.35 million in the financial year ended March 31, 2013 (FY13) and a low of RM20.26 million in FY11.

The company achieved a high normalised profit after tax of RM8.76 million in FY08 and a low normalised loss after tax of RM1.83 million in FY12.

Trading liquidity of Perduren’s shares is lower than the average on the Bursa Malaysia Property Index. This would impact existing shareholders’ ability to realise their investment on the open market if they decided to dispose of a sizeable amount of shares.

Perduren has not made a dividend payout in the last five financial years, from FY09 to FY13. “In view of the fact that the group has not been paying dividends in the past five financial years under review and given that the current gearing level of the group, negative net cash position of the group of RM12.37 million as at Sept 30, 2013 and the financing requirement by the group for a joint venture development project, it appears that the group is unlikely to pay any dividends to shareholders in the near future,” said KAF in the circular.

KAF noted that on Feb 28, 2011, Perduren, through its wholly-owned subsidiary Landmark Zone Sdn Bhd, entered into an agreement with Koperasi Shamelin Bhd for a development project, Shameline Star, comprising serviced apartments and retail units.

However, Landmark Zone does not own the land and the development is a one-off project, it said, adding that Perduren has no other ongoing development projects. Perduren owns several properties in Johor Baru and Kuala Lumpur.

“We wish to highlight to the shareholders that the offer provides an opportunity to exit from Perduren for cash in a very short term at a premium to its historical prices for the past one year up to the last trading day [prior to the date of the notice of offer on Nov 26],” KAF said.

This article first appeared in The Edge Financial Daily, on December 30, 2013.


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