OSK shares jump on founder's offer

PETALING JAYA (July 11, 2013): Shares in OSK Holdings Bhd surged to RM1.73 yesterday in active trade after its CEO and group managing director Tan Sri Ong Leong Huat (pix) made a mandatory offer to acquire all shares not owned by him at RM1.68 each.

A brokerage said minority shareholders in the company should hold on to their stocks as the offer price was too low.

"Minority shareholders should not accept the offer,'' Hong Leong Investment Bank Bhd (HLIB) said in a note to clients yesterday.

It said Ong's offer was "not attractive" because it priced the company significantly below its break-up value of RM2.45 a share.

By implying a 20% holding company discount, the stock should be worth RM1.96 a piece, HLIB Research said.

OSK Holdings' most valuable asset is its 9.82% stake in RHB Capital Bhd (RHBCap), which is worth RM2.14 a share. Recall OSK Holdings had sold its investment banking business to RHBCap last year for RM1.95 billion in stocks and cash.

The mandatory general offer (MGO) on OSK Holdings came on Tuesday after Ong and parties related to him gained more than one-third control of the company's shares following a series of direct deals and open market purchases.

The acquisitions lifted the Ong's family stake in OSK Holdings from 32.31% to 36.72%.

But Ong's intention to keep OSK Holdings' listing status may shed some light on his strategy. One dealer opined that the MGO may lead to a re-rating of the stock.

A veteran stockbroker himself, Ong may have seen the opportunity to increase his stake in the company he founded many years ago at a decent price.

Obviously, he sees a lot more value to this stock, perhaps even as a proxy play to RHBCap.

Shares in OSK Holdings had been confined to a narrow trading range of between RM1.38 and RM1.79 over the past one year.