PETALING JAYA: Market talk on bids for OSK Holdings Bhd and KFC Holdings (M) Bhd has kept their share prices at high levels in recent weeks despite company officials indicating there were no concrete negotiations taking place.

Analysts, however, have opined that the sharp rise in the price of those company shares may jeopardise takeover chances as valuations may stretch, if indeed there were any takeover bids.

Over the past one month, shares of OSK have surged a whopping 47% from RM1.34 to RM1.97 at the close of trading yesterday.

The rise, which coincided with talk during the same period that controlling shareholder of OSK, Ong Leong Huat, was open to the prospect of selling, gained momentum in recent days after a report was published indicating Malayan Banking Bhd might be interested in OSK Holdings.

Both Maybank and OSK Holdings, the parent company of OSK Investment Bank, have issued statements on the matter.

OSK Holdings did not deny such a possibility outright as it said no serious or exclusive discussions had taken place.

Maybank, in its statement to Bursa Malaysia on Wednesday, said it was continuously seeking and assessing various propositions and opportunities that would help achieve its vision to be a regional financial services leader and help create shareholder value.

Ong could not be reached for further comment yesterday.

Industry observers suspect Maybank is going after OSK Investment Bank and, for negotiations to take place, both parties have to approach the central bank for permission to start talks. In this case, that might not have been done yet.

Analysts said the attraction of OSK Investment Bank was its regional licences and exposure.

OSK has built up a presence in four markets in South-East Asia - Malaysia, Indonesia, Singapore and Cambodia.

Contribution from its operations overseas to the group was 25% of total pre-tax profit in 2009 compared to the previous 9% in 2008, with a significant portion derived from its Singapore operations.

According to previous reports, OSK has immediate plans to establish a presence in Thailand, while looking further ahead, it may venture into Vietnam and the Philippines.

"We believe that aside from potential pricing issues, OSK would provide a good fit for Maybank to beef up its Asean platform in the investment banking space," said an analyst from AmResearch.

A fund manager said Maybank was eyeing OSK for its international reach, particularly since it recently got its securities brokerage in Cambodia.

"This would benefit Maybank, as it would not need to go through any red tape for its regional exposure."

The fund manager added that OSK's local investment banking division was doing reasonably well, especially for deals among non-government linked companies.

The steep rise in OSK's share price would make any acquisition now more pricey than initially conceived but analysts said acquisitions of banking operations, which are judged on a price to book basis, should follow historical valuations as a guide.

In Malaysia, these would include CIMB Bank's merger with Southern Bank Bhd, the privatisation of AmInvestment Group Bhd (AIGB) by AMMB Holdings Bhd, the privatisation of CIMB by Bumiputra-Commerce Holdings Bhd and RHB Capital's purchase of RHB Bank from Khazanah Nasional Bhd. All these were done above two times (x) book value.

More recently, the Australia and New Zealand Banking Group bought AMMB at 1.7x book.

As of June 30, OSK has a net tangible asset of RM1.49.

As for KFC Holdings, its share price fell by 4%, or 18 sen, to RM4.29 yesterday but that drop did not quash talk that a large US private equity fund was looking to buy out the company. A top official from KFC Holdings had earlier brushed off talk that the firm was a target of takeover by a substantial shareholder during the recent run-up in the company's share price.

"We are not aware of any plans to privatise KFC Holdings," managing director Jamaludin Md Ali said on Tuesday.

Jamaludin is also the managing director of QSR, which owns a direct 28.8% stake in KFC Holdings.

Takeover vibes surrounding KFC Holdings have also lifted the shares of its parent QSR Brands Bhd and Kulim Malaysia Bhd, which owns 55% of QSR.

QSR shares have gone up 6.2% in the past month but Kulim, a plantations company now riding the benefit of surging crude palm oil prices, was up 42.9% over the same period.

Meanwhile, the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) tumbled 0.9% from a record to close at 1,513.70 points yesterday with big capitalised stocks taking the brunt of profit-taking activities following recent price surges.

Key plantation firm PPB Group Bhd's share price plunged in sympathy with Wilmar International Ltd, a Singapore-listed palm oil trader in which PPB Group owns an 18.6% stake.

Out of the 30 stocks that make up the index, 26 counters were down versus three gainers. Top stocks Maybank, RHB Capital Bhd and Tenaga Nasional Bhd fell by at least 1.5%.

Shares in Muhibbah Engineering Bhd surged 14 sen, or 11.2%, yesterday to RM1.39 after CIMB Research initiated its coverage on the stock with a "trading buy" call and a target price of RM2.

Meanwhile, PPB Group's share price plunged 86 sen, or 4.4%, yesterday to RM18.50 - its second straight day of decline from a record close of RM19.40 on Tuesday.

Shares in Wilmar dropped 3.2% yesterday following rating cuts by analysts who were surprised by a weaker-than-expected performance in the third quarter ended Sept 30.

Despite Wilmar's huge decline and weaker sentiment across the region, Singapore's Straits Times Index ended 0.1% higher at 3,293 points, boosted by rising banking stocks.

Fickled foreign investors, however, hit South Korean stocks hard yesterday. A wave of late selling yesterday pummelled the main Kospi Index 2.7% lower in what had turned out to be the biggest single-day equities rout recorded by the exchange in Seoul.

- The Star Online