Anticipation of special dividend boosts sentiment.
In our report dated Feb 27, ‘09 (BToto: A Balancing Act),we said that Berjaya Land (BJLand), the major shareholder of BToto, has outstanding RM882m 8% exchangeable bonds due in 2011 but the bonds have a put option whereby the bond holders have the right to exercise the option for early redemption at 100% of the nominal value of the bonds. In essence, if all the bond holders were to opt for early redemption, BJLand would have to fork out RM882m to redeem the entire outstanding exchangeable bonds. The bonds are secured against current BToto shares valued at a minimum of 130% of the bond, or 19% of BToto’s share base of 256m shares. BJLand currently has RM2.6bn in gross debt, of which RM882m relates to the exchangeable bonds and RM600m is in cash. Given its high gearing
and potential cash flow constraints with the deteriorating economic conditions, there is a strong likelihood that the most efficient and plausible option would be to flow cash up from BToto via a special dividend, which we estimate could amount to approximately 50 sen/share.
and potential cash flow constraints with the deteriorating economic conditions, there is a strong likelihood that the most efficient and plausible option would be to flow cash up from BToto via a special dividend, which we estimate could amount to approximately 50 sen/share.
Target: 5.10 by OSK