SINGAPORE (May 29): CGS-CIMB Research says minority shareholders of Memtech International (MTEC) should take the cash offer of $1.35 per share, which the brokerage deems to be a “fair” offer price and an “attractive cash exit opportunity”.
“While we like MTEC for its material science expertise in liquid silicone rubber (LSR) and its diversified customer base, we think its near-term outlook could be weighed down by ongoing trade tensions and a global auto slowdown,” says analyst Ngoh Yi Sin.
MTEC earlier this month received a voluntary conditional cash offer by M-Universe – a consortium led by its executive chairman Chuang Wen Fu – to privatise and delist.
See: Memtech offered $1.35/share to delist by executive chairman-led consortium
The offer price is 23.9% above MTEC’s last closing price of $1.09, before the group called for a trading halt on May 13 following the announcement of the cash offer.
It also represents a premium of approximately 31.5%, 31.6%, 35.6% and 30.2% over the volume weighted average price (VWAP) per share for the one-month, three-month, six-month and twelve-month periods, respectively.
According to Ngoh, the offer price implies 1.1 times current P/BV and 15.8 times historical P/E, which is 21% higher than the current trading valuations of industry peers.
“This also compares favourably to the transaction P/Es of 12.9 times and 14.2 times for the privatisation of Fischer Tech and Innovalues, respectively,” Ngoh adds.
The analyst also notes that MTEC’s 1Q19 core net profit fell 37.2% y-o-y and 65.4% q-o-q to US$1.1 million.
This was attributable to rising expenses associated with sales, labour and utility as well as lower auto sales.
“We think the offer is an attractive cash exit opportunity for minority shareholders that does not incur other brokerage and trading costs,” Ngoh says.
