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Friday, November 13, 2009

NSTP (RM2.40) Privatization: Revised Offer

  • Better swap ratio of 1.2 Media share for every 1 NSTP share.
  • NSTP dividend of 40 sen to be paid on 7th Dec 2009.
  • 1 free Media Prima's warrant for every 5 offer shares accepted.
Therefore, NSTP shares should be valued at:
RM2.40 + 40 sen dividend + 10 sen implied dividend = RM2.90


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2 comments:

  1. HOW CAN THEY FIXED THE mEDIA SHARE AT 2.00?? WOULDNT IT POISE A RISK OF SELLDOWN DUE TO DILUTION??.. can they comfirm nstp holders get to sell media at 2.00?? and how

    ReplyDelete
  2. Hello. Thanks a lot for dropping by. With regards to dilution or enhancement of EPS, we have to look at the swap price of Media and the earnings that NSTP can contribute to Media. The lower the swap price, the higher the shares needed to be issued to NSTP. With larger total shares issued, EPS will be diluted. But the mitigation will be the earnings contribution by NSTP which could offset the dilution. There will be no confirmation that NSTP holders will be able to sell Media at RM2.00. It all depends on market demand & supply for its shares. Nonetheless, I think it will still be worth it. Even if you acquire 1 NSTP share at RM2.40 now and accept the offer, you'll get 40 sen dividend, 1.2 Media share at RM2.00 and a warrant worth about 10 sen. If Media shares decline to RM1.85 (My estimated fair value for Media post acquisition) from RM2.00, your gain will still be:
    40sen(dividend)+10sen(warrant)-(1.2x15sen)=32 sen, which is a 16% gain. But of course, we still do not know whether this will go through or not, there are still quite a few 'what ifs'. What if the deal failed? What if they can't get more than 90% of NSTP shares to allow privatization etc?

    As for dilution of EPS, EPS for Media shares will only be enhanced in 2011 whereas in 2010, EPS will still be diluted as NSTP earnings will not be able to fully offset the dilution of Media's larger share base. Actually based on current price of Media at RM1.70 where its PER 2011 is at 12.6x, Media's swap price should be at RM1.85 should PER 2011 be the same at 12.6x post-privatization. Nonetheless, with recovery expected and further rerating of the market, all the shares should be rerated. Media shares will still be trading at PER 2011 of 14x at RM2.00 share price which is fair considering its historical PER has been above 15x.

    Hope this answers your question..:)

    ReplyDelete