PETALING JAYA: MIDF Research views YTL Corp Bhd’s proposal to take YTL Land & Development Bhd private via share swap as positive deal for the group, citing potential value accretion and small dilutive impact.
The research house sees the deal as a positive for YTL Corp as its shares are currently trading at over 100% premium to YTL Land’s price-to-book (PB) valuation of 0.39 times, giving rise to potential value accretion.
“While we are still largely uncertain on YTL Land’s minorities’ reception on the share swap offer (given the large disparity in valuations), despite the dilutive impact, this is potentially a net valuation accretive deal for YTL,” it said in a note.
Although YTL Land currently entails net gearing of 2.6 times compared with 2.2 times for YTL Corp, its net debt is just 5.4% of YTL’s group net debt level.
MIDF noted that YTL’s offer price of 36 sen per share (RM104 million) for the remaining 35% YTL shares is at par to its latest closing price. YTL Land’s irredeemable convertible unsecured loan stock (ICULS) will be offered at a market price of 32 sen per share totaling RM67 million.
“YTL Land is currently loss making and the offer represents a PB valuation of just 0.39 times. For the share swap, YTL’s shares will be valued at RM1.14 (at par to market price), which implies an estimated 0.8 times PBV.”
MIDF said if the offer is fully taken up, it will expand the group’s share base by 150 million new shares equivalent to 1.5% of its share, with the acquisition of YTL Land share accounting for 0.9% and the acquisition of ICULS making up 0.6%.
“However, since YTL Land is loss making, consolidation of the remaining 35% of YTL Land’s losses is estimated to impact YTL’s FY20 net profit by 6% (from an incremental RM26 million net loss).”
MIDF retains its neutral call on YTL Corp with an unchanged target price of RM1.03.
