Intention to privatize
Unconditional voluntary cash offer of MYR1.35/sh
The unconditional voluntary take-over offer for the remaining 87m shares (15.81%) in HSL for MYR1.35/shr by Hock Seng Lee Enterprise Sdn Bhd (HSLE) is 39% above our previous TP of MYR0.97, but in-line with its current share price. We believe the offer price is fair, which implies 15x FY22E PER and 0.8x P/BV (5-year mean). HSL’s net cash was MYR213m end-Sep 2021. We lift our TP to reflect the offer price; maintain HOLD.
No intention to maintain listing status
To-date, HSLE and its joint offerors hold an aggregate 84.19% of total shares. As a result, HSL’s public shareholding spread has fallen below 25% since 30 Dec 2021. We understand that, HSLE does not intend to maintain HSL’s listing status, upon receiving acceptance for its take-over offer which would bring its holding to above 90%.
Offer price is fair
The offer price of MYR1.35 is 0.7% above yesterday’s closing share price. We do think that the offer price is fair being 39% above our previous TP of MYR0.97 which was based on 11x FY22E PER. At MYR1.35, HSL is valued at 15.3x FY22E PER, about its 5-year historical mean of 15.8x.
Challenging near-term outlook
With no sizeable projects clinched in FY21, we estimate HSL’s outstanding orderbook currently stands at MYR1.6b, providing earnings visibility until FY23. However, its near-term prospects remain challenging due to labour shortage, and high construction material and logistic costs. Elsewhere, its property projects have a gross development value of c.MYR2bn, with a development phase over 10-15 years.