Thong Guan is disposing of its entire F&B segment for RM60m cash to a major shareholder in a related party deal, allowing it to unlock value. Kenanga said the move will allow TGUAN to strengthen its focus on high-margin plastic products and expansion in Indonesia and is mostly strategic. The house said the deal is neutral given the valuation of 9x PER (being midway between 11x target PER for TGUAN and TGUAN current market traded PER of 6- 8x). As the sale is subject to shareholders' approval at an EGM, the Kenanga analysts have at this juncture not flowed through any changes into earnings forecasts and maintained TP of RM2.58 and OUTPERFORM call.
The group has announced a proposed disposal of its entire equity interest in Syarikat Thong Guan Trading SdnBhd
(STGT) including its subsidiaries for a total cash consideration of RM60m. The buyer, Foremost Equals Sdn Bhd (FESB), is a major shareholder of TGUAN with a 37.03% direct stake. This transaction is classified as a related-party transaction under Bursa Malaysia's Main Market Listing Requirements due to overlapping interests. Notably, key directors and shareholders of TGUAN, including Dato' Ang Poon Chuan, Dato' Ang Poon Khim, and Datuk Ang Poon Seong, hold significant direct and indirect interests in FESB. An independent adviser has been engaged to ensure fairness and transparency for non-interested shareholders.
The transaction involves a total cash consideration of RM60m, with an upfront deposit of RM6m upon signing the share sale agreement (SSA) and the balance of RM54m payable upon completion. Expected to be completed is in 1QCY25, the sale is subject to shareholder and regulatory approvals. The cash settlement eliminates uncertainties associated with deferred
payments and enhances the financial certainty for TGUAN.The disposal consideration of RM60m was evaluated by FHMH Corporate Advisory, which adopted two valuation methodologies:
At RM60m, the price lies within the RVA range and represents a 46.95% premium over the RNAV. Additionally, the disposal is priced at 9.39x STGT's trailing price-to-earnings (PE) ratio, below the average PE of 13x for listed food and beverage peers. The pricing appears fair and reasonable, considering STGT's modest revenue contribution of 5.24% and profit after tax (PAT) contribution of 6.97% to the group in FY23.
