Lam Soon Cannery Private Limited - more commonly known for its "Knife" brand cooking oil -has purchased a 20% stake in Viz Branz (VB) at a price of S$0.735/share. While this share purchase falls short of triggering a general offer, we view this development as a positive and an important first step for an eventual overall takeover. First, VB's instant beverage business complements Lam Soon's existing operational capabilities and is a natural fit in its wide range of products. Secondly, and more importantly, given the fractured relationship between VB's two substantial shareholders, a reduced stake for its current CEO clearly signifies his intent to leave the business eventually. Although future share sales are likely to be transacted at S$0.735/share, it is only 0.7% lower than our fair value estimate of S$0.74/share. Maintain HOLD.
Partial stake sold to Lam Soon
Viz Branz (VB) announced yesterday that its current CEO, Mr. Chng Beng Beng, sold 57m shares (~16.1% ownership stake) to Lam Soon Cannery Private Limited at a price of S$0.735/share, which reduces his stake in VB from 35.9% to 19.8%. In addition, Lam Soon purchased a further 14m shares in a series of married trades from smaller shareholders to bring its total current stake to 19.8%. While these series of share purchases fall short of triggering a general offer - as it is less than the 30% threshold - we view this development as a positive and an important first step for an eventual overall takeover.
Who is Lam Soon?
Lam Soon is a private, home-grown company dealing with Fast Moving Consumer Goods (FMCG: generally low-cost, non-durable goods that are sold quickly) ranging from cooking, beverage, fruits and vegetables to household products. It is a major FMCG player in Southeast Asia with substantial operations in Singapore, Malaysia, Thailand and Vietnam. Some of the more prominent brands under its extensive portfolio include "Knife" brand cooking oil, "ISOMAX" isotonic beverage, and "Zip" dishwashing liquid. Prior to this purchase, Lam Soon already has a working relationship with VB where it distributes VB's products in Malaysia.
Why only a partial stake?
While the obvious operational synergies exist, the key question remains: why only a partial stake? In our view, the move represents a transitional platform for Lam Soon to come onboard (with possible board representation) and work hand-in-hand with VB's current management. For instance, it is important to remember that VB has operational experience in Myanmar, where Lam Soon has no presence.
An eventual GO is still likely; maintain HOLD
A reduced stake for VB's CEO is clear indication of his intent to leave the business eventually. Therefore, a subsequent sale to Lam Soon and a corresponding general offer is still a distinct possibility. However, valuations are likely to be capped at S$0.735/share, which is 0.7% lower than our fair value estimate of S$0.74/share. Maintain HOLD.
Viz Branz (VB) announced yesterday that its current CEO, Mr. Chng Beng Beng, sold 57m shares (~16.1% ownership stake) to Lam Soon Cannery Private Limited at a price of S$0.735/share, which reduces his stake in VB from 35.9% to 19.8%. In addition, Lam Soon purchased a further 14m shares in a series of married trades from smaller shareholders to bring its total current stake to 19.8%. While these series of share purchases fall short of triggering a general offer - as it is less than the 30% threshold - we view this development as a positive and an important first step for an eventual overall takeover.
Who is Lam Soon?
Lam Soon is a private, home-grown company dealing with Fast Moving Consumer Goods (FMCG: generally low-cost, non-durable goods that are sold quickly) ranging from cooking, beverage, fruits and vegetables to household products. It is a major FMCG player in Southeast Asia with substantial operations in Singapore, Malaysia, Thailand and Vietnam. Some of the more prominent brands under its extensive portfolio include "Knife" brand cooking oil, "ISOMAX" isotonic beverage, and "Zip" dishwashing liquid. Prior to this purchase, Lam Soon already has a working relationship with VB where it distributes VB's products in Malaysia.
Why only a partial stake?
While the obvious operational synergies exist, the key question remains: why only a partial stake? In our view, the move represents a transitional platform for Lam Soon to come onboard (with possible board representation) and work hand-in-hand with VB's current management. For instance, it is important to remember that VB has operational experience in Myanmar, where Lam Soon has no presence.
An eventual GO is still likely; maintain HOLD
A reduced stake for VB's CEO is clear indication of his intent to leave the business eventually. Therefore, a subsequent sale to Lam Soon and a corresponding general offer is still a distinct possibility. However, valuations are likely to be capped at S$0.735/share, which is 0.7% lower than our fair value estimate of S$0.74/share. Maintain HOLD.
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