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Keppel, SPH offer for M1 'fair and reasonable', says IFA

CLSA advises M1 recommending directors to recommend shareholders accept the offer

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Keppel and SPH are making the voluntary general offer for the remaining M1 shares that they do not own via joint venture company Konnectivity Pte Ltd, which is majority owned by Keppel.

Singapore

THE offer of S$2.06 per share that Keppel Corporation and Singapore Press Holdings (SPH) are making for M1 is "fair and reasonable and not prejudicial to the interests of shareholders as a whole", said CLSA Singapore, in a circular to shareholders and optionholders on Monday evening.

"Accordingly, we advise the recommending directors to recommend that shareholders accept the offer, unless shareholders are able to obtain a price higher than the offer price on the open market, taking into account all brokerage commissions or transactions costs in connection with open market transactions," said the independent financial adviser to the independent directors of M1.

Keppel and SPH are making the voluntary general offer for the remaining M1 shares that they do not own via joint venture company Konnectivity Pte Ltd, which is majority owned by Keppel.

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The offer price represents a premium of 36 per cent over the lowest closing price of S$1.520 over the 52-week period before the last trading date prior to the offer, and a premium of 25 per cent over equity research analysts' average target price of S$1.644.

CLSA said it arrived at its recommendation having taking into account various considerations. Factors in favour of the offer price include the fact that it represents premiums of, respectively, 18 per cent, 21.8 per cent, 29.1 per cent and 29.9 per cent over the one-year, six-month, three-month and one-month volume weighted average price (VWAP) of the shares up to the last trading date.

It also represents a premium of 25.2 per cent and 26.3 per cent respectively over the the VWAP of S$1.646 and the closing price of S$1.63 on the last trading date.

Other factors in favour include that M1 shares have not traded above that price since Sept 22, 2017, and that the price/earnings and EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation, and amortization) multiples implied by the offer price are higher than the historical traded multiples from Sept 22, 2017 till the last trading date.

Factors against the offer price include that the price/earnings multiple for the last 12 months, at 13.9 times, is lower than the mean and median price/earnings multiples of comparable companies.

CLSA advised the recommending directors to consider highlighting to shareholders "that there is no assurance that the price of the shares will remain at the current levels after the close or lapse of the offer and the current price performance of the shares may not be indicative of the future price performance levels of the shares".

M1 shares ended unchanged at S$2.07 on Monday.