Yesterday, Adventa announced that Aspion SB, a company 30%-owned by its director Low Chin Guan and 70%-owned by Mulberry Asia Fund II L.P. - managed by Southern Capital Group - have proposed to acquire all of Adventa’s business and undertakings, including all of the company’s assets and liabilities, at RM320.9m, or RM2.10/share.
RM2.10 offer price based on 12x PE on FY13 EPS. This is in fact our fair value for the company, which also represents the industry average’s PER valuation. Although Adventa should technically be valued at below the industry’s average valuation given that it is the smallest among its peers, it also produces the best surgical gloves among its peers, which should justify a valuation of at least at the industry average.
venta shareholders to get at least RM1.70/share in cash. We understand that the company’s shareholders may not be paid the RM2.10/share entirely in cash, but will get a minimum of RM1.70/share, or about a 10x FY13 PER valuation, which we think may be somewhat under-priced. Nevertheless, management would only fix the quantum of distribution upon completion of the acquisition of all of Adventa’s businesses and undertakings, after which the company may be classified as a 'cash company' under PN17.
Adventa to have cash of RM61.1m, if it distributes RM1.70/share. In order to maintain its listing status, the company may consider acquiring another business but nothing has been put forth to date.
Maintain Buy. Our fair value for Adventa is RM2.10, based on a PER of 12x on FY13 EPS. We believe that management initiated this corporate exercise because it feels that the investment community has not conferred a premium valuation on its stock despite the company’s leadership in the surgical glove market.
Source: OSK
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