QL to continue pursuit of Lay Hong?

PETALING JAYA: QL Resources Bhd's takeover offer for Lay Hong Bhd may have fallen through, but analysts believe QL's desire to gain control of the company has not abated and its next step will be to secure board representation at Lay Hong.
An analyst who declined to be named believes that QL will look to appoint its representative to the Lay Hong board again, now that it is the second largest shareholder of Lay Hong.
Shareholders with substantial stakes in listed companies are generally expected to have board representation, the analyst said, adding that it is considered a norm.
"That's why we still expect QL to send their representative to Lay Hong board," he added.
In the event that QL fails to do so, the analyst said Lay Hong is likely to requisite an EGM to appoint its director while at the same time look to remove a few of the existing directors.
QL has a 38.3% stake in Lay Hong after returning the acceptances by Lay Hong shareholders following the lapse of the takeover offer.
Maybank IB Research stated in its note that QL's end-September net gearing went up from 0.44 times to 0.46 times, as an estimated RM20.1 million was spent to purchase Lay Hong shares in the open market even after the takeover offer was made.
It is maintaining a "hold" recommendation on QL, with an unchanged target price of RM3.20.
CIMB Research, in its research note yesterday, also said that by having a larger stake in Lay Hong, QL will have more influence on the company and will continue to fight for a board seat.
The research house said it is neutral on this new development as QL will have a larger stake in the company which gives it more influence in Lay Hong, while everything else remains status quo.
"We believe that Lay Hong's family will continue to grow the company, which in turn should benefit QL," it said.
CIMB Research added that the lapse of the takeover offer was expected given that Lay Hong's family had not intended to sell the business and has strong support from other parties.
It has maintained an "add" call on QL, with a fair value of RM4.29.
CIMB Research also pointed that as the Lay Hong family and QL collectively own 82.3% of Lay Hong currently, thus QL doesn't meet the 25% public spread requirement.
"In order to prevent it from being delisted, we believe that both parties will negotiate and work out a solution."
PublicInvest Research was not surprised that the deal had fallen through saying that with the controlling Yap family helming management and having executed plans over the last three years, the takeover bid by QL seemed like quite a long-shot.
QL's share price was down 4 sen to close at RM3.27 yesterday, while Lay Hong was up 1 sen to RM3.46.