Is Samling Really Interested In Buying LINGUI?

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Jan 29 2007
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After Lingui Developments Berhad (KLSE: stock-code 2011) recent AGM (Annual General Meeting) back in Nov-2006, managing director Yaw Chee Ming told reporters that the company is getting ready to reap the profit from the pine plantation in its’ 35,000ha in New Zealand in another couple of years. He further said the company had been harvesting 100,000 to 150,000 cu m annually due mainly to the clearing of the way for lumber roads. Lingui also held 850,000ha of concession land in Sarawak, a Malaysian state rich with forest.
The group posted a net profit of RM22.6 Million on revenue of RM1.24 Billion for the financial year ended June-30-2006. Its’ export of logs for the financial year 2006 amounted to 294,606 cu m, 28.6% lower than previous year in 2005.
Earlier in July-2006, Lingui announced the acquisition of 24,000,000 ordinary shares of RM1.00 each in Samling Plywood (Miri) Sdn Bhd (SPM), representing 60% of the entire issued and paid-up ordinary share capital of SPM, for a purchase consideration of RM 89,554,589 satisfied by issuance of 74,628,824 new ordinary shares of RM 0.50 each in the Company at an issue price of RM1.20 per new ordinary share. The acquisition expanded the company’s timber concession to about 800,000ha from previous 650,000ha.
Samling Global Ltd (SGL) – which owns a 40.75% stake in Lingui – made a mandatory general offer for the rest of the shares it did not own in Lingui at RM1.01 cash each on Apr-2006. The offer valued the stock at about 21 and 23 times its projected earnings for the years ending June 30, 2006 and 2007 respectively. SGL’s offer for the balance 390.81 Lingui million shares is worth RM395mil. SGL stated its intention to maintain Lingui’s listed status, but said it would take steps to de-list the company if its stake in Lingui increased to above 90% following the takeover offer. But the shareholders didn’t like the proposal when it only managed to secure about 20% of the shares it did not own, bringing its shareholding up to 60.6%.
According to BizWeek, Samling is said to have upped the price to RM4.00 per share – a sign that Yaw family is ready to dig deep into their pocket for RM1 Billion to buy the remaining 259.5 million shares it does not own(Lingui had a net asset per share of RM2.20 per share). Yaw Teck Seng who control Samling Group acquired about 130.7 million shares or 20% in Lingui at RM1.01 a share mid last year, 2006, forking out only some RM132mil for the equity.
Lingui stock was trading as high as RM3.12 per share today, Jan-29-2007, an increase of over 17% to the closing last Friday. However minutes ago, Lingui said it had received a letter from Samling on Saturday saying that neither it nor its subsidiaries planned to take Lingui private, in responding to a stock exchange query. The most important question is why would Samling offer to buy Lingui at P/E (price to earning ratio) of more than 80 times? So, was it a purely rumor spread by interested parties to benefits from the stock run-up or another chapter of buying-over is in place?

# TIP: Be careful not to get caught in the price run-up due to rumor, unless you’re one of the insiders who knew something is actually cooking. Send me an email if you are, okay?

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