DMG Research and OCBC have recommended that shareholders of Sakari Resources accept a cash offer by PTT Plc to buy over the rest of the coal company at USD 1.90 per share.

Mr Joshua Low analyst at DMG said that the offer price values Sakari at USD 2.2 billion, which appear fair.

Unlike AmFrasers Securities' analysts, Mr Low does not think that PTT will be able to acquire a 90% stake in Sakari to trigger a compulsory acquisition of all remaining shares. But a 50% stake is still possible, given that it already owns 46% of Sakari.

He added that "We recommend stakeholders to accept the offer as offer price is a 28% premium to the last close, and offer price of USD 1.90 is fair at 7.6 times FY 2013 price to earnings ratio and 5.7 times FY 2013 EV EBITDA."

Mr Carey Wong analyst at OCBC said that the last time Sakari's share price was around USD 1.90 was on May 8th 2012. He added that "Since then, it has fallen 39% to a low of USD 1.16, likely spooked by uncertain outlook for global coal prices."

OCBC also encouraged shareholders to accept PTT's offer because a competing bid was unlikely.

Mr Wong said that "As the offer is some 31% above our previous DCF (discounted cash flow) based fair value of USD 1.45, we think that shareholders should accept the offer, especially in light of the still uncertain longer term outlook for global coal prices. In addition, we do not expect a competing bid as PTT group already owns such a large stake."

DMG Research raised its target price on Sakari to USD 1.90 from USD 1.89 previously. Its coal price assumptions for FY 2012 and FY 2013 stand at USD 102 per tonne and USD 115 per tonne respectively and it expects that a 5% decrease in FY 2013 coal price would lower earnings then by 13%.

Source - Business Times

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