EON Capital Bhd
(March 19, RM6.93)
Maintain hold with unchanged target price of RM7.20: The resignation of four non-executive directors at EON Capital (EONCap) is not unexpected and will reduce its boardroom size to 10 members. We expect a shareholders meeting to be called next by the new board to approve the sale of assets and liabilities of the group.

Meanwhile, we are increasingly concerned about the impact of corporate shareholders’ tussle affecting operations and business. We maintain our hold recommendation  with an unchanged dividend derived model-based (DDM) RM7.20 target price.

EONCap’s independent non-executive chairman Tan Sri Syed Anwar Jamalullail, who had helm the post since June 2006, has resigned. Three other independent non-executive directors have also resigned: Datuk Dr Mohd Shahari Ahmad Jabar, Rodney Gordon Ward and Yeo Kar Peng.

Mohd Shahari was appointed in July 2006, while Ward and Yeo were both appointed in July and Dec 2008, after Primus Pacific Partners emerged as a substantial shareholder with a 20.2% stake.

The resignation of the four directors is subject to Bank Negara Malaysia’s (BNM) clearance. In addition, seven directors, who were added to the board during a shareholders’ EGM on March 15, are still awaiting Bank Negara’s go-ahead. With this recent development, EONCap’s boardroom will comprise 10 members.

The three existing directors who will stay on are Rin Kei Mei and Datuk Seri Dr Tiong Ik King who were both appointed directors in December 2002 and Ng Wing Fai who was appointed in July 2008, representing Primus.

As stated in our note on March 16, we think that Hong Leong Bank would revive its offer which had lapsed on Feb 2, after which EONCap’s board will put to vote the offer in a fresh EGM. A 50% plus one share vote is all that is needed for EONCap to sell its assets and liabilities.

Nonetheless, we are increasingly concerned. The corporate-shareholders’ tussle which started just before Christmas last year has dragged on for three months, and looks likely to last another few months.

This may indirectly impact operations and the implementation of near-term strategic business direction for EONCap. — Maybank IB, March 19


This article appeared in The Edge Financial Daily, March 22, 2010.