Recall that yours truly had in an earlier blog posting highlighted
the pending sale negotiations for MAA to dispose its 75% stake in MAA Takaful.
Fast forward to present day, on 4th May 2016, MAA officially
announced the signing of S&P agreement with Zurich to Bursa Malaysia. All
the pros highlighted will be realized should the sale go through namely:
Management aggressive
buyback: Management has continued its share buyback spree by buying approximately
2.6 million shares from the open market at an average price of around 0.95 per
share. This provided a strong support basis for the share price.
Favourable valuation
obtained for sale of MAA Takaful – This is huge positive surprise as the
sale price of RM393.75million for its 75% stake values MAA Takaful at Price to
Book (P/B) ratio of 4.49 times, well above prevailing valuation of comparable
M&A transactions.
Management unlocking
share value via distributions – Management has proposed a special dividend
amounting to RM0.35 per share should the deal goes through smoothly, which may take
about 3 months or more.
Post disposal MAA will be a cash rich company. It intends to
maintain its listing status, hence there may be room for management to hoard
the cash pile since it is likely to avoid being a cash company. NTA after
disposal is estimated to be RM2 per share after declaration of special
dividend.
Yours truly once held MAA shares but had since been disposed
for other utilization, hence missing the impending big gain when shares begin
trading on 5 May 2016.
There may be opportunity if the share price is right for some risk arbitrage gains,
but subject to final computation of expected remaining cash pile per share held
by the company and of course share price levels.
Final thoughts:
Pros: None. Subject to share price which may present some
risk arbitrage opportunities.
Cons: Management hoarding cash or deploy in value destroying
new core business.
Note: This is not an investment advice. Buy and sell any
securities at your own risk.
Disclosure at time of publication: None.
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