SINGAPORE (Feb 22): CIMB Research continues to keep its “add” recommendation on Auric Pacific Group with an unchanged target price of $1.96 after the group on Tuesday posted a turnaround in FY16 with $72 million in earnings, which was largely in line with the research house’s expectations.
(See also: Auric Pacific back in the black with FY16 earnings of $7.2 mil)
Auric Pacific is an investment holding company which owns and operates a range of businesses including the Food Junction chain of food courts.
In a report on Tuesday, CIMB cautions that its current rating and target price on the stock, which is based on a 25% liquidity discount to the research house’s FY17 SOP estimate of $2.61 per share, is valid only if the group is to remain listed.
Auric Pacific is presently in the midst of a potential takeover by its major shareholder, Stephen Riady, and his son-in-law Andy Adhiwana, who have together made a voluntary cash offer of $1.65 per share to take over the remaining shares which they do not own in the company.
“Since the offer was announced on Feb 7, the offeror has acquired c.4.4 million shares via market transactions, representing 3.5% of Auric’s total issued share cap. We note that c.3.6 million (2.86%) of the transacted shares were acquired in the first two days after the announcement and the remaining 0.8 million (0.64%) shares were acquired in the subsequent eight trading days,” recap analysts Roy Chen and William Tng.
This means the offeror needs to collect another 12.3 million of shares in Auric Pacific by Mar 24 in order to successfully delist the group.
“Investors should stay vigilant on the acceptance level,” reiterate the analysts, who previously expressed their belief that the group was instead worth $2.22-$2.61 per share from a controlling shareholders’ perspective, rather than the offer price of $1.65.
(See also: Controlling shareholder Stephen Riady makes cash offer to take Auric Pacific private)
(See also: Offer price for Auric Pacific is ‘not favourable’; here’s what CIMB thinks the group is worth)
“Given that most of the rationalisation of its non-performing food retail business is completed today and most of the necessary impairments have been provided for, we believe that Auric is poised for a refreshed start in FY17F and we are optimistic about its FY17-18F earnings outlook,” conclude Chen and Tng.
As at 10.50am, shares of Auric Pacific are trading flat at $1.66.
