Tuesday, May 20, 2014

Can-One - A Good Bargain Or Risky Bet !!!

Current (15 May 2014) Can-One market cap shrank to rm435 million.

Can-One a good bargain or a risky bet?

To some quarters, the stock could be a good bargain now (15 May 2014) to pocket rm482 million cash once Kian Joo Can Factory Bhd sells its business to Aspire Insight Sdn Bhd for rm1.46 billion.

Critics however say this could be a risky bet should the deal fall through.

Can-One has a 32.9% stake or 152.4 million shares in Kian Joo. Based on Aspire Insight’s offer price of rm3.30 per share, Can-One’s block of shares in Kian Joo would bring home rm482 million or rm3.16 cash per share which is higher than its current (15 May 2014) market price.

This is also means that investors are getting Can-One’s other core business free at this price. Can-One’s other core businesses are manufacturing of tin cans and plastic jerry cans as well as dairy and non dairy products such as condensed milk.

The rm482 million cash in hand would enable Can-One to pay of its borrowings of rm300 million as at end 2013. The company had taken up rm240 million debts to purchase stake in Kian Joo from the See family. Can-One won the bid for Kian Joo at rm1.65 per share.

The asset would make Can-One a cash rich company. Assuming that Can-One settles rm240 million of borrowing, it would still have a rather big cash pile of rm242 million or rm1.59 per share.

Unfortunately the sale of Kian Joo remains uncertain.

Can-One’s share price may lose more ground if Kian Joo’s proposed divestment fails.

Aspire’s offer for sale has drawn strong opposition from some shareholders including the Datuk Anthony See.

Some parties think the offer price of rm3.30 is too low, it should be as high as rm6 considering Kian Joo has the lion’s share of the domestic aluminium can market. It also owns several parcels of land in the Klang Valley where land prices have appreciated substantially. Also Kian Joo owns a 54.83% stake in Box Pak Bhd.

Datuk See has taken legal action in a bid to prevent Can-One from voting for Kian Joo’s proposed asset sale … largely of the connections between Yeohm Chee and Can-One deemed related party transaction.

If Can-One could not vote at the EGM, and EPF which holds a 10.03% stake in Kian Joo is also to abstain from voting as it is also the offeror.

This will leave holders with about 57% of shareholding to decide on the proposed asset sale. It requires 75% of those non interested shareholders’ supportive vote to pass the resolution.

In this scenario, the See family which is believed to control a 15% stake if not more, in Kian Joo could be a deal breaker.

However the current (May 2014) legal suits by See will not be able to stop Kian Joo’s board from proceeding with the proposal unless he applies for a court injunction to block it.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.