Wednesday, September 13, 2006

Privatisation And M&A Activity

Following the blog on the same topic last week, the privatisation / M&A juggernaut seem to be gaining fervour. First the rumoured Esso Malaysia, then an actual bid by QSR for KFC, and then Intan Utilities. Rather than focus on those, it might be good to look at other likely potentials, it is not a coincidence that the bulk of the concentration will be in banks:

1) RHB Capital - The debate continues with respect to the pricing for RHB Capital. While many analysts peg a likely buyout price at RM3.30-3.40, there are good reasons that the buyout price could even be higher (current price RM2.60), closer to RM4.00 owing to the implied pricing betwwen RHB and Utama.

2) Affin/Boustead - Not a particularly well managed bank but Boustead should be asking for at least RM2.10 (current price RM1.70). This will also boost Boustead's RNAV from the present RM2.82 to RM3.00. Boustead's pretty illiquid and now trades at RM1.86. Could be interesting should the Esso Malaysia deal materialises as well, but that's an IF.

3) EON Capital - DRB-Hicom should be looking to sell its 20% stake in Eon Capital. A price for a sale is pegged at RM8.00-RM8.40 a share (currenct price of Eon Capital is RM5.70). DRB-Hicom will then see its RNAV rise from RM2.20 to RM2.40, but bearing in mind that it currently already trades at a deep discount to RNAV at RM1.40, I am not sure if a sale of EON Capital will even move DRB-Hicom's share price much.

Of course, these stocks would not move in the direction suggested until a concrete deal has been struck. But should volume activity jumps consistently, then at least we can have a headstart in assessing their likely target prices.

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