No Deal, What Is Next?

Company Updates – Kian Joo Can Factory Berhad (“KJCF”)

The proposed RM1.47bil sale of Kian Joo Can Factory Bhd’s entire business and undertaking to Aspire insight Sdn Bhd, a company partly owned by tne Employees Provident Fund Board (EPF), has been called off.

This also means that the proposed cash distribution of at least RM3.30 per share to Kian Joo shareholders is off, as returning the cash proceeds to them is conditional on the proposed disposal being completed.

There was a much-publicised but unsuccessful court battle to block Aspire Insight’s takeover of tin can and cardboard carton maker Kian Joo. The length of the court battle may have helped to derail the plan, but the final deal-breaker is a disagreement over the sale’s price tag.

In a statement to Bursa Malaysia on Friday, Kian Joo said it and Aspire had mutually agreed to terminate the business sale agreement (BSA) signed in March 2014 and its ancillary agreements.

http://www.thestar.com.my/business/business-news/2016/04/16/kian-joo-and-aspire-call-off-takeover/

Company website sourcelink: http://www.kianjoocan.com.my/

Technically Speaking

The calling off of the takeover exercise has finally removed the overhang over KJCF’s share price. Upon the announcement, its share price has shot up to as high as RM3.38.

KJCB_TA

As of 11 May 2016, KJCF closed at RM3.15 which is considered as “oversold” (from Win%R and RSI indicators) and further, it traded close to the support area of RM3.10. With a “Hammer” candlestick and 50D moving average crossing over the 200D, there is a potential rebound opportunity. Resistance is expected at RM3.44, which may be potentially considered as immediate target price.

Share price has been falling lately partly, attributable to the recent disposals by EPF. However, the existing substantial shareholder, Dato See has been supporting the company as shown below:

KJCF_Insiders.png

Fundamentally Speaking

KJCF_Fundamental.png

Based on a simple desktop analysis, current indicative equity valuation of KJCF is about RM3.50 per share, which represents approximately 10%+ premium to its current price of RM3.15. Based on assumed 12% annual growth rate in share price, KJCF is forecasted to reach RM3.92 by end of 2016.

Analysts’ Price Target

KJCF_Analysts.png

Concluding Remarks

Short term rebound opportunity, with support at RM3.10 and resistance at RM3.44. Supported by good business fundamentals and higher analysts’ target price. There was also a competing offer earlier, at RM3.74 per share for KJCF. (http://www.thestar.com.my/business/business-news/2014/03/12/spotlight-on-epf-toyota-tsusho-offer-will-be-good-opportunity-for-fund-to-cash-out/).There may be potential concerns in view of the on-going tussles between See Family and Management of KJCF. 

DISCLAIMER: ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED ABOVE.

 

 

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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