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Kian Joo and Can-One

There were many queries following the posting on Can-One.

a) Kian Joo can still dilute by having the warrants issue at 1 sen, if the 32.9% block relinquished their right to subscribe. Comment: That was the case as the court case was still dragging on. It is not going to happen as Bursa rightly has withheld approval pending the decision of the Federal Court. The See family can kiss their sinister plan goodbye.

b) If everyone is saying Can-One is worth RM3.00, why isn't the share racing up to that level? Comment: Its in a rerating process. The court decision is a major factor and catalyst. The second catalyst is the actual crossing of the shares by KPMG, which is supposed to be done today or tomorrow according to market newsflow. The crossing removes the final apprehension, and actually a lot of funds are readying to buy Can-One once that happens. Can-One and KPMG should be working diligently to process this asap so as to take control of Kian Joo (either via appointing their own board members and/or vetoing/approving corporate exercises).

c) Can the See family try to win back Kian Joo? Comment: No, if they are sane. Their stake is less than 10% in Kian Joo, to win control, they have to do a G.O. at much much higher levels (e.g. RM2.60-2.80) and still they may not succeed. If the See family tries that, its so easy for Can-One to up their shares as well with minimal funding requirements. They also cannot do it via Can-One, i.e. take control of Can-One as the controlling shareholder has 51% of Can-One.

d) How will the whole thing develop? Comment: Can-One will take control of the block quickly, call an EGM at Kian Joo quickly, put in their directors and remove some. Call another EGM at Can-One and immediately considers a few viable options. One is to take Can-One private. The other is to go through a rights issue with free warrants, pay down the loan with the proceeds. Or, do a similar merger akin to Sapura/Kencana, where you create a SPV and both parties subscribe shares in it. That would probably value Can-One at around RM2.60 and Kian Joo at RM2.80.

e) 1+1 = 2 or 3? Collectively, they control the bulk of the industry for Malaysia. Hence there will be economies of scale for sure. One thing which many have overlooked is the potential upcoming business of "sweetened milk", which is a major project between Felda and Silverbird. Guess who is the common shareholder in all this?

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