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Takeover offer @ S$0.70-S$0.75

Story

received a pre-conditional voluntary cash offer from China

Holdings Acquisition Corp. (“CHAC”), a special purpose

acquisition company incorporated in US.: Bright World (“BWPM”) announced that it has

Point:

it receives <90% acceptances or a higher S$0.75 if >90%

acceptances. This translates into 9.8x-10.5x on its FY07 EPS

and FY07 P/BV of 2.6x-2.7x.

The offer is conditional upon CHAC receiving more than

70% acceptances. This is almost in the bag as CHAC has

received irrevocable undertakings from the majority

shareholder, World Sharehold Ltd who holds 77.4% of

BWPM. World Sharehold is owned by Chairman Mr. Wang

Wei Yao and CEO Mr. Shao Jian Jun. CHAC will then issue

to World Sharehold Ltd a promissory note convertible into a

minimum of 19.9m shares or 50% of CHAC. It is the

intention of CHAC to take BWPM private but will retain the

key management and operation of the Group.CHAC will pay S$0.70 cash for each BWPM’s share, if

Relevance

66%-78% premium to BWPM’s 6-month volume weighted

average price and 89%-102% premium to its last closing

price on 18 July. Stripping off net cash, the offer price at

S$0.70 would value the core business at 10.5x 2008 PER

similar to its more established Japanese peers. We expect

BWPM’s share price to trade closer to offer price of S$0.70.

Investors may also take the opportunity to lock in profit now

instead of waiting for another 6-12 months pending

necessary approvals. Risk to completing the takeover could

arise from one of the pre-conditions that BWPM cannot

report earnings decline of more than 10% in 2008 given

rising iron and steel costs. We expect BWPM to report

11.5% decline in operating profits to RMB135m in 2008.: Accept the offer. The offer price is attractive at