CGS-CIMB supports shareholders of FGV Holdings Bhd to accept a share acquisition offer by the Federal Land Development Authority (Felda).
The brokerage firm was quoted by Bernama as saying that the plantation company's share price had received a boost from previous media reports regarding the possible takeover offer by Tan Sri Syed Mokhtar Albukhary, which led to the expectation that the shares could be revalued close to its fair value at the time.
"However, due to the latest developments and the dominance of more than 50% of Felda in FGV, a competitive offer for FGV is not expected.
"FGV's free float will also go down after the takeover offer. Therefore, we tend to expect the offer to be accepted given the limited increase in current price levels and taking into account the risks, ”CGS-CIMB said in a research note today.
On January 22, independent advisor to RHB Investment Bank said the price of RM1.30 per share was 'unfair but reasonable' but recommended that FGV shareholders accept the offer.
However, the non-interested director of FGV advised shareholders to reject the offer as the value of the offer was below the price of public issue (IPO) at RM4.55 per share and the quality of FGV's plantation assets had improved significantly since the IPO.
Meanwhile, according to CGS-CIMB, the conflicting advice is likely due to different expectations on FGV's share price performance after the offer period ends.
Clearly, independent directors of FGV may believe stock prices will rise following crude palm oil prices and an improved estate age profile.
According to RHB Investment Bank, the proposal is not fair because the RM1.30 offered is low and is a discount of 8.5% to 18.8% compared to the estimated range of FGV shares obtained using the SOP valuation method between RM1.42 and RM1.60.
CGS-CIMB maintained a 'hold' recommendation for FGV shares and a target price of RM1.30 to reflect the acquisition bid price.
