NSTP file pic of a Perodua Bezza. [NSTP/ZUNNUR AL SHAFIQ]

KUALA LUMPUR: UMW Holdings Bhd’s nearly RM1 billion bid to gain control of Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and MBM Resources Bhd may be scuppered by the issue of pricing.

Some analysts said low offer price could be a point of contention for MBM Resources shareholders particularly to accept the bid and the subsequent mandatory general offer (MGO).

They said UMW’s RM418 million offer to raise its stake in Perodua by 10 per cent stake looked unattractive as the overall RM4.18 billion implied value was low for the country’s leading automotive company.

They felt UMW’s RM501 million offer for a 50.1 per cent stake, or RM2.56 per share, in MBM Resources was unattractive too as it was a steep discount to the latter’s net asset per share.

Still, analysts said the offer gives a chance for MBM Resources shareholders to exit its manufacturing business that has seen lacklustre growth.

As for UMW, they said there are synergies to be extracted from MBM Resources’ autoparts and automotive distribution businesses.

Last Friday, UMW offered to buy the 50.1 per cent MBM Resources stake from Med-Bumikar Mara Sdn Bhd. The acquisition will trigger an MGO for the remaining shares in MBM Resources.

Post-MO, UMW did not intend to maintain the listing of MBM Resources, which holds an effective 22.58 per cent stake in Perodua.

Separately, UMW offered to buy the 10 per cent Perodua stake from Permodalan Nasional Bhd (PNB), to be paid by new shares and cash.

Affin Hwang Capital said the proposed MBM Resources acquisition valued the company at 30 per cent discount to its net asset of RM3.68 per share as at end-December last year.

The firm explained that assuming a fair value of RM943 million for MBM Resources’ 22.6 per cent stake in Perodua (using the UMW-PNB deal as benchmark), UMW offered an effective RM141 million (adjusted for RM83 million net borrowings) for MBM Resources’ manufacturing business, facilities and office buildings.

As for the Perodua offer, Affin Hwang said the RM4.18 billion implied price tag valued Perodua at nine times its 2016 price earnings ratio, which seems low for the second national car manufacturer.

Perodua, which has made net profit of well over RM400 million each year since 2012, had a 40 per cent share of all new vehicles sold in January this year.

Overall, Affin Hwang said the acquisitions, if materialised, would boost UMW’s effective stake in Perodua to 70.6 per cent from 38 per cent, thus strengthening its position in the local automotive market.

JF Apex Securities deemed the offer price for MBM Resources stake as reasonable.

“The offer price is fair as it implies forward PE (price earnings) of 10.04x, which is in line with the valuation of other small cap stock of 8-10x, and on par with consensus target price of RM2.59,” it said.

RHB Research, meanwhile, said UMW and MBM Resources are a good fit.

The firm said MBM Resources’ Daihatsu and Hino distribution franchises would broaden UMW’s commercial vehicle offerings, given its focus on small and mid-sized trucks.

“We do not expect any objections from UMW’s key principal, Toyota, given that Daihatsu and Hino are already key companies within the Toyota Motor Group.”

RHB Research added that MBM Resources’ autoparts business would fit in seamlessly with UMW’s manufacturing and engineering division.

“The new ownership structure could also offer more supply contract opportunities for MBM Resources’ troubled alloy wheel manufacturing business,” it added.



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