Broker's take: OCBC recommends investors to accept Temasek's SMRT offer

INVESTORS are better off accepting Temasek Holdings' S$1.20 billion buyout of SMRT Corp, given the unexciting outlook and capped earnings upside of the transport operator under the New Rail Financing Framework (NRFF), OCBC Investment Research said on Thursday.

". . . we recommend investors to accept the offer by approving the scheme arrangement", analyst Eugene Chua said.

Mr Chua said with Temasek's buyout on the table, SMRT's share price is expected to spike up when trading in the stock resumes on Thursday.

"However, as there is the risk of the proposed acquisition falling through, we advise investors to also consider selling part of their holdings in the open market at around S$1.68," he suggested.

The takeover offer by Temasek's wholly owned Belford Investments, received by SMRT on July 16, a day after details of the NRFF were unveiled, is pegged at S$1.68 cash per share, by way of a scheme of arrangement. One of the conditions to be satisfied is to get SMRT's shareholder approval (excluding Temasek) through a scheme meeting.

The scheme price of S$1.68 cash per share values SMRT at some S$2.57 billion and is an 8.7 per cent premium over its last traded price of S$1.545 last Friday. It is also a 10.7 per cent premium over its three-month volume-weighted average price prior to the last trading day.