Saturday, November 20, 2010

Take Over Plan, Will KFC Go Up Further?

As reported by most main media on 20th November 2010, Tan Sri Halim Saad has made offer to takeover KFC Holdings Berhad (KFC) by purchasing QSR Brand Berhad (QSR) shares from Kulim Berhad.

Kulim Berhad is the company owns 59.58% shares in QSR and QSR in turn owns 50.3% shares in KFC. As known by public KFC is the operator of international well known brand outlets in Malaysia (a part from Singapore, Brunei, Cambodia and India) namely KFC Restaurants and Pizza Hut outlets. Apart from that KFC is also the owner and operator of Ayamas outlets.

Since the takeover involving three public listed companies, what is the effect over the share price of those companies?

From my point of view, the news of takeover which believed to be materialized will give negative effect to QSR price  but positive effect to Kulim and KFC price based on the following analysis.

QSR
A report says that, QSR price offered by Halim Saad to Kulim will be RM5.18 namely two times than book value of RM2.59 as at end June 2010. Meanwhile the market price of QSR before suspension on 19 November 2010 was RM5.76.

Since the market price is higher that offer price, it will make the price of QSR unattractive and investors will sell QSR shares instead of buying, therefore QSR price will down once  it is resume trading in the market next week

KULIM
Five years ago, Kulim bought 43% QSR shares for RM3.20 per share. If Kulim agree with Halim Saad’s offer i.e RM5.18 per share, Kulim will gain RM1.92 per share or 60% capital gain for five years investment. As an effect Kulim will receive a lot of cash from this take over and therefore the price may go up.

KFC
Readers can refer to my previous article in this blog. KFC price was RM3.63 when I made the analysis and recommend to buy based on fundamental. Few weeks later the price was above RM4.00 i.e short term target. Since KFC has very good fundamental strengths as written in my previous article, I believe that KFC price can go higher in mid and long term even before news of takeover published.

No matter either the takeover will be materialized or not, KFC is still a good investment. Takeover plan by former influential billionaire who want to make a comeback will support and make KFC shares more attractive as well as  speed up the upward movement. Nevertheless, I do not deny should the takeover fail, the KFC price will move to the south but only in short term.


The above analysis is my point of view only.

- Sabri Jalil

 



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