Jaya Holdings – Takeover exercise by Nautical Offshore at $0.70?

Thursday, May 28, 2009

Jaya Holdings Ltd., a vessel-chartering company majority owned by Affinity Group’s Nautical Offshore Services, soared to its highest level in seven months amid hopes charter rates will remain firm.

Jaya has broken above its KRL at $0.58; more than 61m shares were traded yesterday suggesting that momentum is in place. We believe Jaya has upside to $0.72; recommend buy with stop-loss below $0.57.

Market grapevine moots another theory that Nautical Offshore, who is Jaya’s 54.8% majority shareholder, may be launching another takeover exercise for Jaya. Nautical Offshore is a wholly owned unit of U.S. based Affinity Group. Considering Nautical’s last $1.45/share general offer for Jaya in 2007, the huge discount implied in Jaya’s last traded price of $0.60/share does open up this possibility. Taking a reasonable test, a $0.70 takeover price would imply valuations of 6x PE (2009E) and ~1.3x P/B. As a comparison, this compares well with ASL Marine, which we estimate to be valued at 3.2x PE (2009E) and 1x P/B.


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