KAF Seagroatt-Campbell: Risk Arbitrage or reverse risk arbitrage? (2)

Recall earlier posting that there is a potential risk arbitrage gains about 7.5% should you purchase KAF shares on 22 February 2016. The offer has officially become unconditional and the offeror had proceeded to scoop up the remaining shares in KAF. KAF IB will have full control of KAF Seagroatt-Campbell. This deal will be finalized by June 2016 and will close a chapter on the takeover deal. The price has shot up to RM2.69 per share and those holding on to the shares can sell them back at RM2.70 for some savings on brokerage expenses. No further opportunities are expected from this share.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 

MAA: Something Brewing? (2)

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 4^th 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.

 

Golden Land Bhd: Special dividend and capital repayment as catalyst for share price uptrend movement?

Golden Land Bhd (Stock Code:7382) listed on Bursa Malaysia announced on 8 June 2015 that it has signed a conditional sale and purchase agreement to sell 4 of its subsidiaries and a piece of plantation land to a ubsidiary of Felda Global Ventures (Stock Code:5222). Fast forward to March 2016, the sale and purchase is almost nearing its completion stage with the latest announcement in its quarterly report ending 31 Dec 2015 indicating completion of disposal in early March 2016 and receipt of the balance of cash receipt amounting to a total of RM655million.

Yours truly had been collecting Golden Land shares in several trades after the announcement of the deal, with the view that the announcement of the cash distribution will provide a short term catalyst for narrowing of discount of its share price to its intrinsic pure cash value, hence providing a short term risk arbitrage gains.

Based on the latest quarterly financials as at 31 December 2015, intrinsic cash value (A) is determined to be as follows (RM1.87 per share):

 

Note: (B) represents expected cash outlay for purchase of palm oil plantation in Indonesia as announced in its quarterly report.

Based on the current share price of RM1.61 as at 4 March 2016, there is still a 15% discount to its intrinsic cash value, excluding all other fixed assets. The actual NTA is deemed to be higher but had been excluded in the computation.

For those holding on to the Golden Land shares, it may be ripe for harvesting and to take the opportunity to dispose your shares for any gains obtained, since bulk of its income generating palm oil assets will have been fully disposed.

For those that are willing to ride on Golden Land’s shift of focus into growing its Indonesian palm oil plantation operations and smallish property development ventures, the net cash value post distribution may serve as a cash buffer for future operations and should you choose to hold on to the shares.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 
Disclosure as at time of publication: Long Golden Land Berhad.