I have done a sum-of-part (“SOP”) modelling to work
out the indicative valuation for Padiberas Nasional Berhad (“BERNAS”). It is using
discounted free cash flow for equity method for the concessionaire core
business and PE multiples for the investment in Gardenia bread and flour
business. According to the SOP method, the indicative valuation of BERNAS
should be RM6.15, which is 1.66 times higher than the offer price of RM3.70, or
the offer price is just taking a deep 40% discount to its value. I have been quite conservative in applying
variables in the model with a lower perpetual growth of merely 2%, should the
growth higher the indicative valuation could be more than RM6.15.
Valuation Matrix
Perpetual Growth Rate (%)
|
||||||
1%
|
2%
|
3%
|
4%
|
5%
|
||
Discount (%)
|
0%
|
5.50
|
6.15
|
7.03
|
8.30
|
10.31
|
10%
|
4.95
|
5.53
|
6.32
|
7.47
|
9.28
|
|
20%
|
4.40
|
4.92
|
5.62
|
6.64
|
8.25
|
|
30%
|
3.85
|
4.30
|
4.92
|
5.81
|
7.22
|
|
40%
|
3.30
|
3.69
|
4.22
|
4.98
|
6.19
|
|
50%
|
2.75
|
3.07
|
3.51
|
4.15
|
5.15
|
|
60%
|
2.20
|
2.46
|
2.81
|
3.32
|
4.12
|
|
So is this fair for dissenting shareholders to accept
such a low offer of RM3.70 which is endorsed by the so-called “independent” adviser, i.e. Kenanga
Investment Bank to be ‘fair and
reasonable’. Since the core business of BERNAS is a monopoly business based on
concessionaire which contributed 90% of the indicative valuation, paying hefty
dividends and its cashflow can be forecasted due to the nature of the business,
why not using a discounted cash flow or discounted dividend model instead of
using simple relative valuation methods like P/E or P/B multiples? Is it
because all these discounted models will derive higher valuations that would expose
the unfairness of the offer of RM3.70?
It would be more worse to dissenting shareholders even
if they reject the exit offer, as the offerors who hold more 86% of BERNAS
shares will vote to delist BERNAS which only require 75% vote in value on those
who present in the EGM. Dissenting shareholders will end up either holding
unlisted shares or their shares would be even compulsory acquired if the
offerors acquired 90% shares of the disinterested shareholders.
This is a great
oppression on minority shareholders’ rights of getting a fair exit!
Find attached with the valuation model below:
Discounted Value (Bernas)
http://www.investalks.com/forum/redirect.php?goto=findpost&ptid=124&pid=2893030
http://www.investalks.com/forum/redirect.php?goto=findpost&ptid=124&pid=2893030
