AMFraser has a BUY rating for PEC with a fair value of $1.40. PEC’s low valuation and its cash value of 67 cts a share could present itself as an attractive takeover target. See AMFraser’s report in –
www.remisiers.org/cms_images/research/Ju...Ltd_-_Amfr_-_BUY.pdf
If a conglomerate like Keppel Corp (for example) were to take over PEC, it could well be a great win-win situation for both parties. PEC would have a strong parent to support its business and its share price could be revalued substantially upwards. Keppel Corp would acquire a cash-rich, well-managed company that could add at least $35 million nett profits annually to its bottom line. With Keppel’s share price of around $11, Keppel could issue shares or part-share part-cash thus incurring little or no additional financial liability. Keppel’s shareholders would not suffer any earnings dilution as PEC has rather low valuation. (For an issue of up to 50 million Keppel shares to take over the 250 million PEC shares, each newly issued Keppel share would have an earning capacity of at least 70 cts).
With many S-chips currently having very low valuation, it also makes sense for some astute investors to embark on similar takeover or merger of some of the cash rich and better-managed S-chips.
