EonCap Gets Downgraded For Rejecting A Grossly Unfair Offer!

27th Jan 2009: MSWG says not a fair price, reject it

• “We believe EONCap has not fully expounded its value yet. Although the bank’s ROE (return on equity) is lower than (that of) other banks, we do not think it is doing very badly either. If you look at the company’s fundamentals, it has the potential to grow,” she told The Edge Financial Daily yesterday.
  
  Bushon said based on MSWG’s estimates, a fair price for EONCap shares would be between 1.6 and 1.7 times book value.
  
  Based on the latest quarterly results where EONCap’s shareholders funds amounted to RM3.49 billion, a valuation of 1.6 times book would translate to about RM8 per share.
  
  “If you look at acquisitions involving banks in recent years, it ranges between 1.3 times and two times book value. But, what HLBB has offered to pay is at the low end of the scale, which we do not agree with,” she said.
  
  Bushon also voiced her dissatisfaction over the mode of takeover adopted by HLBB.
  
  HLBB is proposing to acquire the assets and liabilities of EONCap under the Companies Act which requires approval of only 50% plus one vote as opposed to the Takeover Code which requires 90% shareholder acceptance.
  
  Bushon said HLBB’s attempt to take over EONCap via acquisition of its assets and liabilities was unfair to the latter’s minority shareholders.
  
  She said the fact that HLBB did not want to get all of EONCap’s shareholders’ approval for its takeover attempt was a negative development for the minority shareholders.
  
  “We think that this is oppression against the minority shareholders, as we believe they are not getting a fair deal out of this takeover,” she said.

I fully agree one hundred percent that it wasn't fair and I was very happy to read that since then EonCap has rejected the offer.

However, I was more than displeased to read the following article. EONCap gets thumbs down from analysts

Thumbs down because the company rejected a lousy and grossly under-valued offer from HLBB?

Sigh!

Here's some of the so-called comments posted...

• OSK Research downgraded EONCap’s fair value to RM6.60 following the lapse of HLBB’s offer and the absence of credible bids, but maintained its neutral call on the stock, while Maybank Investment Bank Research downgraded its buy call to a hold but kept its RM7.20 target price.
  
  AmResearch also downgraded the stock, to a sell from hold, with a revised fair value of RM5.50 a share.
  
  HwangDBS Vickers Research, however, maintained its hold and RM7.10 target price, given that HLBB’s bid could still go through if shareholders requisitioned an EGM to vote against the board’s decision not to table the offer to shareholders, as speculated in the market.
  
  “Assuming bets are still on, EONCap could still trade close to HLBB’s proposed offer price of RM7.10 if shareholders push for an EGM. If the shareholders fail, EONCap’s share price could correct to its fundamental value of RM6.30, in our opinion,” the research house said.
  
  To recap, HLBB had made a RM4.92 billion, all cash, offer to take over EONCap’s assets and liabilities, in a deal that could turned them into the country’s fourth largest bank, in terms of assets.