PHILLIP: Takeover Offer Presents Exit Opportunity Amid Challenging Outlook
| Key Information Summary | |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation | |
A conditional voluntary takeover offer for remaining shares at RM2.35 has been extended by Tan Sri Lim Kok Thay and his Persons Acting in Concert (PAC). This move follows an acquisition that raised their collective shareholding to 49.4%, triggering the obligation for the takeover offer. The investment bank advises investors to accept this offer, perceiving it as a timely exit opportunity.
Offer Valuation and Rationale
The offer price of RM2.35 represents an 11.5% premium to the company’s 5-day volume-weighted average price (VWAP). However, from a valuation standpoint, it implies a 17% discount to its 5-year historical average EV/EBITDA multiple of 9x. Despite this discount, the bank views the offer favorably given the prevailing market conditions.
Performance and Challenges
The recommendation to accept the offer is primarily driven by a subdued earnings outlook and persistent cost pressures. Analysts anticipate escalating operating and labour costs across all key markets to weigh on earnings, with moderation expected in the second half of 2025. Furthermore, the planned US$5.5 billion New York Downstate casino expansion is projected to require significant capital expenditure. This could necessitate additional borrowings, leading to heightened interest expenses, reduced balance sheet flexibility, and constrained dividend payouts, especially given the current 0.7x gearing level.
Future Outlook and Investment Stance
While the potential securing of the New York Downstate casino license could significantly boost 2026E EBITDA by RM240–310 million (translating to an additional RM0.20-0.25 per share in valuation), the RM2.35 offer price is believed to have already partially factored in this potential upside. The bank maintains a HOLD rating and has increased its target price to RM2.35 (from RM2.10) to match the offer price. Although the offer provides a clear exit opportunity, some investors with higher entry costs may opt not to accept.
