Milton Corporation Limited 

MLT Details

Proposed Merger with WHSP: Milton Corporation Limited (ASX: MLT) is a listed investment company managing ~$3.7bn in assets. As at 18 June 2021, the company’s Pre-Tax Net Tangible Asset value per share stood at $5.46. On 22 June 2021, MLT announced a proposed merger with Washington H Soul Pattinson (“WHSP”). MLT and WHSP have entered into a Scheme Implementation Agreement (SIA) under which WHSP proposes to acquire 100% share capital in MLT. This transaction is expected to provide the company additional liquidity to fund further diversification across multiple asset classes that are seeing strong deal flow.  MLT directors intend to vote in favor of the proposed transaction. The proposed merger is subject to various conditions, such as MLT’s shareholder approval and court approval. As per the SIA, MLT’s shareholders is likely to receive 10% premium on MLT’s pre-tax net tangible assets (NTA), fully franked special dividend of 37cps, final dividend of 8 cps, access to fully franked final dividend from WHSP of 36 cps. The final dividends are subject to the results of both the entities.

Key Dates for Proposed Merger: The SIA for the proposed merger has been initiated from 22 June 2021. The company is expecting the first court hearing and issue of scheme booklet to MLT’s shareholders in early August. The scheme meeting is likely to approve in mid-September. In late September, second court hearing and scheme record date is expected to take place. The scheme implementation and special dividend to MLT’s shareholder are expected in early October.

1HFY21 Financial Highlights: MLT has registered a decline in its operating revenue to $40.85mn in 1HFY21 against $72.34mn in 1HFY20. Similarly, the company has posted a decline in its profit to $38.35mn in 1HFY21 against $70.23mn in 1HFY20 due to lower dividend income received on portfolio of investments. MLT has seen a decline in its cash balance to $59.71mn as on 31 December 2020 against $114.06mn as on 30 June 2020.

Operating Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to COVID-19 uncertainties. MLT has registered lower profits due to lower dividend received during COVID-19 pandemic. In addition, the company is required to outperform the benchmark to showcase its performance among peers. Therefore, weak performance against benchmark may impact the business of the company. 

Outlook: MLT is going through a proposed merger with WHSP. WHSP is likely to acquire 100% share capital of MLT for its continuous long-term market performance and growth in dividends. The merger is likely to provide diversified portfolio, higher cash generation through dividends and a significant increase in market capitalisation in the future. 

Stock Update: The stock of MLT gave a return of ~18.60% in the last one month and a return of ~23.40% in the last three months. The current market capitalisation of MLT stands at ~$3.37bn as of 22 June 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$4.010~$5.840. The company is going under proposed merger with WHSP. The director of the company is in favor of the merger, considering an increase in market capitalisation, higher cash generation, increase in dividend income, and diversified portfolio.  At the close of 22 June 2021, the stock was trading at the market price of $5.80, up by 15.999%, owing to the announcement related to the proposed merger with WHSP.

MLT Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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