Pelikan and China Stationery fall, merger deal reportedly off
Business & Markets 2013
Written by Kamarul Anwar and Ho Wah Foon of theedgemalaysia.com
Wednesday, 04 September 2013 13:24
KUALA LUMPUR (Sept 4): Pelikan International Corporation Bhd fell by as much as seven sen or 14% early today while China Stationery Ltd (CSL) fell 4% after their merger deal was reported to be falling apart by a Chinese newspaper yesterday.
Another news report today said that a CSL official had confirmed that the two companies’ distribution synergy had been called off.
The official said the main reasons were cultural differences between the two companies and differences in opinion over the pricing strategy.
At 12.30 lunch break, Pelikan shares receded 4.5 sen or 9% to 45.5 sen on heavy trades of 32.6 million shares. The net value of the share as at end-June 2013 was RM1.04.
CSL of China ended at 23 sen per share, down 0.5 sen or 2% after falling to a low of 22.5 sen, on trades of 32.8 million shares. Its net value per share stood at RM1.14 as at end-June 2013.
Both counters were among the top ten actives.
According to senior remisier Goh Kay Chong, the plunge of Pelikan shares today could also be due to profit-taking, as the stock had surged 14.5 sen or 41% to close at 50 sen yesterday.
Goh of SJ Securities told theedgemalaysia.com that Pelikan had surged after the news report yesterday because investors thought “it is good for Pelikan to split with China company.”
“To split with China Stationery of China could be good for the stock as investors do not have much confidence in China companies. Punters who bought yesterday are making money today,” said Goh.
He said lately investors are also looking for penny stocks to play as blue-chip counters have been victims of the volatility brought forth by the impending tapering of the US Federal Reserve quantitative easing.
In addition, investors do not like the way Pelikan had been sold down by CSL recently.
According to exchange filings, Pelikan had been a subject of recent disposal by China Stationery. As of yesterday, CSL held only 2.37% of Pelikan shares after disposing 3.56% stake between August 28 and 30.
Last December, Pelikan signed a two-year dealership agreement with CSL for the latter to distribute and sell office and school stationery products marketed by Pelikan under the "Pelikan" trademark in China and Hong Kong on a non-exclusive basis.
But CSL has been reducing its shareholding in Pelikan after the former had paid a premium to acquire a 9.79% stake for RM50 million via a share swap.
Dealers said CSL’s selling off its shares in Pelikan had accelerated the downtrend of Pelikan’s share price, which have been hitting its lows in five years.
Fundamentally, Pelikan’s restructuring and product rationalisation measures managed to turn the company around in its second quarter of 2013. Its net profit for the quarter was RM8.8 million against net loss of RM2.8 million a year ago.