Stock Name: TGOFFS
Company Name: TANJUNG OFFSHORE BHD
Research House: MAYBANK
Tanjung Offshore Bhd
(June 18, RM1.20)
Maintain buy at RM1.20 with lower target price of RM1.30 (from RM1.45): Ekuiti Nasional Bhd's (Ekuinas) entry into Tanjung Offshore (TOFF) is positive to the latter's financials and operations. We think Ekuinas will create value for TOFF, in terms of opening up new business opportunities, and could raise its stake beyond 20% in later years.
TOFF remains a buy but we have lowered our 2010-12 EPS forecasts by 7%-10% taking into account the enlarged share base effect. Corresponding to that, our target price is adjusted to RM1.30 with an unchanged seven times FY11 EPS.
Ekuinas, a government-linked private equity fund, will emerge as a new shareholder at TOFF following the completion of (i) the private placement exercise of 26 million new shares, and (ii) the purchase of 30.5 million shares from co-founder Haji Abdullah (18.5 million shares) and other existing major shareholders (12 million shares) at RM1.30 per share. Subsequently, Ekuinas will become TOFF's second largest shareholder with a 20% stake (ex-ESOS and warrants).
The private placement exercise is expected to be completed by 3Q2010, pending shareholders' approval at the next AGM. The purchase price is at a 8.3% premium to last Thursday's closing price but is deemed fair as it is transacted at 6-9 times FY10-12 EPS and 10% discount to our earlier target price.
The RM33.8 million proceeds from the private placement exercise will help TOFF lower its net borrowings and net gearing levels to RM532 million (-6%) and 148% (-29 percentage points) respectively.
Ekuinas' entry into TOFF is strategic and fulfils its investment criteria as it has a positive view of the oil & gas (O&G) sector, which we concur.
We think Ekuinas will be keen to open up new business opportunities for TOFF, locally and abroad and help consolidate small bumiputra-linked companies. In view of this, we do not rule out Ekuinas raising its stake in TOFF beyond 20%. ' Maybank IB Research, June 18
This article appeared in The Edge Financial Daily, June 21, 2010.
Company Name: TANJUNG OFFSHORE BHD
Research House: MAYBANK
Tanjung Offshore Bhd
(June 18, RM1.20)
Maintain buy at RM1.20 with lower target price of RM1.30 (from RM1.45): Ekuiti Nasional Bhd's (Ekuinas) entry into Tanjung Offshore (TOFF) is positive to the latter's financials and operations. We think Ekuinas will create value for TOFF, in terms of opening up new business opportunities, and could raise its stake beyond 20% in later years.
TOFF remains a buy but we have lowered our 2010-12 EPS forecasts by 7%-10% taking into account the enlarged share base effect. Corresponding to that, our target price is adjusted to RM1.30 with an unchanged seven times FY11 EPS.
Ekuinas, a government-linked private equity fund, will emerge as a new shareholder at TOFF following the completion of (i) the private placement exercise of 26 million new shares, and (ii) the purchase of 30.5 million shares from co-founder Haji Abdullah (18.5 million shares) and other existing major shareholders (12 million shares) at RM1.30 per share. Subsequently, Ekuinas will become TOFF's second largest shareholder with a 20% stake (ex-ESOS and warrants).
The private placement exercise is expected to be completed by 3Q2010, pending shareholders' approval at the next AGM. The purchase price is at a 8.3% premium to last Thursday's closing price but is deemed fair as it is transacted at 6-9 times FY10-12 EPS and 10% discount to our earlier target price.
The RM33.8 million proceeds from the private placement exercise will help TOFF lower its net borrowings and net gearing levels to RM532 million (-6%) and 148% (-29 percentage points) respectively.
Ekuinas' entry into TOFF is strategic and fulfils its investment criteria as it has a positive view of the oil & gas (O&G) sector, which we concur.
We think Ekuinas will be keen to open up new business opportunities for TOFF, locally and abroad and help consolidate small bumiputra-linked companies. In view of this, we do not rule out Ekuinas raising its stake in TOFF beyond 20%. ' Maybank IB Research, June 18
This article appeared in The Edge Financial Daily, June 21, 2010.
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