Straits Asia shares swing on PTT's bid

THAI energy group PTT Public Company's intentions to acquire Straits Asia Resources saw a mixed reaction on the stock market yesterday as the mining company's share price gyrated before closing unchanged.

The stock ended the day at 84.5 cents - unchanged from its closing price last week prior to a trading halt on Monday - but not before it had swung between the day's high of 87.5 cents and low of 83 cents.

PTT Public Company on Monday unveiled a pre-conditional mandatory cash offer for Straits Asia Resources at 80.7 cents a share, pricing Straits Asia Resources at about $880 million.

Analysts viewed the bid as 'lacklustre' and 'below market expectations', citing an undervaluation of Straits Asia Resources, which owns and operates two coal mines in Indonesia.

'The offer price was derived from Straits Asia Resources' 20-day volume-weighted average price (VWAP) prior to March 20, but falls 4.5 per cent below its last transacted price and 7.9 per cent short of its six-month VWAP,' said Lee Wen Ching, an analyst with OCBC Investment Research, in a report yesterday.

'We are of the view that the takeover offer undervalues Straits Asia Resources, and do not expect investors to accept the offer,' said Mr Lee, who is maintaining a 'buy' rating on the company with a fair value estimate of $1.15, based on its fundamentals and earnings prospects.

A DBS Vickers Securities analyst has also advised investors not to accept the tender offer because of Straits Asia Resources' expanding volumes and its ongoing exploration to strengthen its coal reserves.

The pre-conditional offer had come on the back of PTT Public Company's US$335 million conditional deal with Australia-incorporated resources company, Straits Resources Limited (SRL), to acquire 60 per cent of SRL's subsidiary, Straits Bulk and Industrial Pty Ltd (SBI).

The completion of the acquisition of SBI will trigger a firm offer for Straits Asia Resources, in which SBI owns a 47.1 per cent stake.

Straits Asia Resources said that it would appoint an independent financial adviser in due course to make a recommendation about the offer.

Source : Singapore Business Times