Stock Name: EONCAP
Company Name: EON CAPITAL BHD
Research House: OSK
KUALA LUMPUR: OSK Research is maintaining its NEUTRAL recommendation on EON CAPITAL BHD [] and an unchanged RM7.30 target price to reflect the current offer price from Hong Leong Bank.
'Assuming that Primus Pacific Partners was successful in its legal suit and the offer from HLBank is reversed, we may revert back to our fundamental fair value of RM6.80 (1.25x FY10 PBV, 11% ROE, 3% growth rate),' it said in a research note issued on Tuesday, June 22.
On Monday, Primus filed a legal suit against a number of respondents including certain members of the board of directors of EONCap.
In the suit, Primus alleged that:-
1. The manner in which the offer is being implemented constitutes an arrangement that irrevocably severs the ties between the shareholders and EONCap
2. The appointment of the seven new directors to the Board of EONCap was not viewed as being in the best interest of the shareholders of EONCap, whereby the appointment of the new directors was essentially for the purpose of helping to revive and to force through the offer by HLBank to help certain groups of shareholders to realize their investment.
3. The actions of certain directors following their appointment were not consistent with the principals of the law, whereby they were deemed to have failed to exercise their fiduciary duties.
OSK Research said Primus has opted to file a full legal lawsuit with the hearing date being fixed for July 6. A certificate of urgency has also been filed, for which a decision from the court could be obtained by early August.
Although the board of EONCap had planned to convene the EGM for shareholders to decide on the offer from HLBank by mid-July, the research house believed that the board of EONCap could now make a decision at Tuesday's AGM to potentially delay the proposed EGM date to a later date pending the court's final decision as this would only be deemed fair in the eyes of minority shareholders.
'Primus will not be seeking a court injunction to stop the upcoming EGM as an injunction would only be temporary in nature while a swift legal suit that works in its favor would essentially serve to overturn the proposed resolution by the EONCap board to table the offer by HLBank to shareholders of EONCap, thus ensuring continuity in Primus' current role in EONCap,' it said.
OSK Research said given that legal matters and their implications are not within its area of expertise, it would not be fair for it to draw a conclusion on the outcome of the legal suit.
'That said, Primus may have a point with regard to the manner in which the sheer number of new directors were appointed to the board that may have had the effect of creating an unfair board majority to push through the HLBank offer to shareholders.
'However, as a mitigating factor, we also note that the new board line-up has been ultimately approved by Bank Negara Malaysia, which would have acted in the best interest of safeguarding standards of corporate governance,' it said.
Company Name: EON CAPITAL BHD
Research House: OSK
KUALA LUMPUR: OSK Research is maintaining its NEUTRAL recommendation on EON CAPITAL BHD [] and an unchanged RM7.30 target price to reflect the current offer price from Hong Leong Bank.
'Assuming that Primus Pacific Partners was successful in its legal suit and the offer from HLBank is reversed, we may revert back to our fundamental fair value of RM6.80 (1.25x FY10 PBV, 11% ROE, 3% growth rate),' it said in a research note issued on Tuesday, June 22.
On Monday, Primus filed a legal suit against a number of respondents including certain members of the board of directors of EONCap.
In the suit, Primus alleged that:-
1. The manner in which the offer is being implemented constitutes an arrangement that irrevocably severs the ties between the shareholders and EONCap
2. The appointment of the seven new directors to the Board of EONCap was not viewed as being in the best interest of the shareholders of EONCap, whereby the appointment of the new directors was essentially for the purpose of helping to revive and to force through the offer by HLBank to help certain groups of shareholders to realize their investment.
3. The actions of certain directors following their appointment were not consistent with the principals of the law, whereby they were deemed to have failed to exercise their fiduciary duties.
OSK Research said Primus has opted to file a full legal lawsuit with the hearing date being fixed for July 6. A certificate of urgency has also been filed, for which a decision from the court could be obtained by early August.
Although the board of EONCap had planned to convene the EGM for shareholders to decide on the offer from HLBank by mid-July, the research house believed that the board of EONCap could now make a decision at Tuesday's AGM to potentially delay the proposed EGM date to a later date pending the court's final decision as this would only be deemed fair in the eyes of minority shareholders.
'Primus will not be seeking a court injunction to stop the upcoming EGM as an injunction would only be temporary in nature while a swift legal suit that works in its favor would essentially serve to overturn the proposed resolution by the EONCap board to table the offer by HLBank to shareholders of EONCap, thus ensuring continuity in Primus' current role in EONCap,' it said.
OSK Research said given that legal matters and their implications are not within its area of expertise, it would not be fair for it to draw a conclusion on the outcome of the legal suit.
'That said, Primus may have a point with regard to the manner in which the sheer number of new directors were appointed to the board that may have had the effect of creating an unfair board majority to push through the HLBank offer to shareholders.
'However, as a mitigating factor, we also note that the new board line-up has been ultimately approved by Bank Negara Malaysia, which would have acted in the best interest of safeguarding standards of corporate governance,' it said.
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