MPHB - Finally came out with a plan to buyout the remaining 49% from the funds which took Magnum private in the first place. If MPHB did nothing and just allow the refloatation of Magnum, that would have been a classic "wtf were you guys doing in the first place". If you allow the immediate floatation, MPHB will only gain from a revaluation of its 51% stake as it cannot sell that down, and chances are MPHB minority shareholders will just be standing by the sidelines watching Magnum being relisted. That would have been very bad PR and corporate strategy as the only real gainers would have been the 49% private equity funds, as they can sell at higher prices. If that had happened, we all should wonder what was MPHB thinking in the first place, that would have meant being party to some private equity funds, agreeing to let them take Magnum private and then allowing them to relist the thing later .... what did MPHB gain in between all that? That would have been THE SAME as letting Magnum stay listed, and who knows Magnum may have surged in valuations over the past year as well.
Luckily, MPHB was wise enough to buy the 49% and the price was good. However, MPHB said the acquisition of the stake in Magnum from CVC group, which totalled RM1.6bil, would involve an issuance of around 344 million new MPHB shares at RM2.30 each and cash amounting to around RM809.2mil. OK, here is why the private equity funds agreed to sell, the issuance of new MPHB shares at just RM2.30. This would enhance the actual real gains of these private funds' investment significantly.
But to be fair, this is the better strategy, at least when MPHB relists Magnum, I am sure MPHB shareholders will be getting some "free Magnum shares". Don't jump yet, the quantum is not fixed. It can be as rich as 1 free for every 3 shares, to a not so enticing 1 free for every 10 shares. Even so, we can safely say that there should be a small windfall. I think RM3.10-3.20 is a fair value leading up to the listing of Magnum.
Notion Vtec - The shares hit a bottom recently at around RM1.70 on very thinly traded volume following the downgrade of earnings. Now almost every analysts and funds seem to be hovering over the company like vultures on under valuation radar. There were rumours of a private equity potential buyout offer at much higher levels a few weeks back as well. That is speculation but what is true is the oversold label for Notion Vtec.
Maybank research came out with a good report recently and that they expect NVB’s 1QFY11 core results to be robust, likely ahead of consensus forecasts. Maybank's current FY11 net profit forecast is 14% above consensus. The camera segment (from new sub-assembly orders) will drive FY11 growth while the HDD section will take a back seat. We maintain our 2-year net profit CAGR forecast of 38% and introduce FY13 forecast. NVB is expected to release its 1QFY11 results in the third week of February. We estimate NVB’s 1Q revenue to be around RM56m-60m (+9-16% QoQ) with net profit of RM11m-14m (+34-71% QoQ) on stronger net margin (+2.4-9.1 ppt QoQ). This would imply 23- 29% of our full-year net profit forecast, and 25-32% of consensus.
While Maybank's estimate for 1Q net profit is already above consensus, I believe even that could be surpassed as the camera business remained solid the last time I spoke to industry experts. The over selling owing to their HDD business has been way overdone, and actually should not figure prominently as a significant segment of their biz model.
Another fact overlooked by many is that they will be getting MSC tax status which could further lift EPS by 6 sen. Maybank sees a target price of RM2.40, I am more bullish with a target of RM2.60 within 3 months. The emergence of any genuine M&A exercise would only be a bonus to their already solid fundamentals.
Ekovest - The stock has high volatility because of the numerous big projects facing them. They are likely to get RM1bn-2bn of works in the Iskandar region. Their Danga Bay project may be in for further "exercise" with Tebrau to leverage on the Iskandar themed massive project. They are also awaiting the awardment of the Klang Valley river project said to be worth up to RM8bn in value in ajv with MRCB.
All that seems fine and dandy but what piqued my interest even at levels above RM4.00 is the whispers that they may have secured the 1+3D franchise from Tanjong, in a jv with another party. If you look at Ekovest paltry paid up of just 179m shares. This would really send the counter skyhigh.
Judging from the way the shares moved up and the volume accompanying its trend, there appears to be little or no distribution of shares, which can only mean that its not just a play. I see a lot of upside for Ekovest in the weeks ahead as well as voilatility. Target, what target, how to put any target when we do not have any financials of the deals ... Enjoy the ride.
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