Well, this will be a record of sorts, 3 postings on the same stock within a week. To be fair, the markets have been very quiet and Can-One/Kian Joo saga is damn interesting. Wish we had a few talented business writers to capture the full script of behind the scenes manoeuvring, strategy, risk management and the personalities behind them ... much like The Barbarians At The Gate (RJR Nabisco), Steve Jobs in and out of Apple over a prolonged period, the disastrous Mike Eisner's emperorship during his stay at Disney, etc.
Anyway, I read The Edge just now, the writer Chong Jin Hun, had more questions on the whole thing. I will attempt to furnish a clearer picture. His last line was a request for Can-One to shed some light on it. I am not Can-One, although I write as if I am a substantial shareholder (lol):
a) "its been a week ... Can-One is not in a hurry to purchase the Kian Joo shares"
Comments: The writer is right in citing the Hong Leong Bank-EON Cap deal where the shares were crossed in one business day. Well, it is Hong Leong. In Can-One's case, the company has to wait for the liquidator i.e. KPMG to act. KPMG is not the beneficial final owner, so you can whack them with a cane, they will proceed diligently and cover their ass at every step. The executive director of KPMG apparently only flew back in over last weekend. Despite gaining the Federal Court verdict, it wanted a written legal opinion from the lawyers that they can proceed (ass covering). Now, more ass covering, they are apparently waiting for the actual original copy of the judgement by Federal Court as they deem photocopies and an actual live oral delivery of the verdict by the Federal Court judge is not deemed as sufficient for them to act (an enormous act of ass covering despite the fact that the Federal Court is the final level, no more appeals allowed). Credible sources indicate that the actual crossing will be Tuesday, Monday will be the release of the original by Federal Court. Go figure.
b) "Some quarters believe that the company may not have enough funds to buy ..."
Comment: Again pure conjecture. To be bidding for it a couple of years ago, the company had already lined up funding. They had been appealing the case over the last 2 years. Why appeal if funding is an issue? The funds are from Kuwait Finance and the crossing broker is MIMB - this from 3 different sources, reliable enough? Which bank does not want to fund this deal, gotta be kidding me.
c) ".. Can-One's delay ... may give the See family another opportunity to block the share sale again .."
Comment: What talk cock you??? What talk balls you??? (Thats funny in Cantonese). Federal Court, final... you want to appeal to the King izzit? Which part of "final" you no understand? There is the case of blocking Kian Joo's bonus and right issue, which Can-One is appealing, date pushed to March. Now, its really a none issue because once Can-One gets the 32.9% block, they will call and EGM and cancel the rights issue. The court case will dissolve then. There is no chance of Bursa acting on Kian Joo's proposal as the indication is that they will wait for all the appeals to be heard or dismissed before approving the bonus/rights. Kudos to Bursa for doing the right thing.
d) " ... gearing of one times, which is on the high side.."
Comment: Errr, 1x gearing is on the high side, I don't know which university you come from ... how to be high when the jump in borrowings is largely in buying a heavily discounted current, valuable, liquid asset??? I guess, if you get a chance to buy a liquid current asset (say shares) at a 30%-40% discount to the market, you won't take it up because you will be geared too high?? What is high gearing, if its more than backed by accretive EPS growth and more important substantive free cash flow to more than pay down interest on loan. All that with a huge buffer in terms of risk management.
e) there was speculation that Can-One will make a G.O. for Kian Joo after securing the block, as written in an article in The Edge as well
Comment: Not going to happen. As things stand you cannot be serious to mount a G.O. as there is still some 65% shares of KJ out there. You are talking about at least RM600m. A more likely development will be a merger: e.g. KJ shares swap at RM2.80 and Can-One shares swap at RM2.60 into a SPV and the SPV will take over as the listed vehicle. That way, The controlling shareholder of Can-One will still control the merged entity. Some of the peripheral assets in KJ can then be sold down to freshen up the balance sheet, or even a lucrative rights/free warrants as well.
Needless to say, the above questions to a large extent are valid, and thats what holding back the share price's uptrend. Watch for upside explosion when shares are actually crossed. Funds will pour in, uncertainty wiped out, some board members of Kian Joo will resign, ... then you have one solid near monopoly, which should be accorded a premium. But also thanks to the "delay" and so called "uncertainties", this has, in my view, presented investors who do their homework, ample opportunities, to buy on the low into Can-One.
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