Tan has also upped his target price to 23 cents, which is close to Milkyway’s offer price of 22.66 cents per share, from 18 cents previously.

“We believe that the deal is likely to go through, considering the irrevocable undertaking from the parent company and attractive offer price. However, we downgrade to ‘hold’ as the current share price of 22 cents (as at 2.30pm on <a href="https://www.theedgesingapore.com/news/ma/chinas-milkyway-chemical-makes-2266-cents-go-lhn-logistics" target="_blank">June 5</a>) has almost reached the acquisition offer price of 22.66 cents,” he writes.

To the analyst, Milkyway’s offer price indicates a calendar year (CY) 2024 P/E of 10x, which he deems as attractive given that it is above both its logistics peer group and previous target price multiple of 8x. The offer price also represents a 45% premium to the six-month volume weighted average price (VWAP) of the shares traded in LHN Logistics, Tan notes.

“We recommend that investors accept the offer upon the announcement of a formal offer from the offeror,” says Tan.

That said, a discontinuation of the acquisition plan and a failure to obtain consent from JTC Corporation are key downside risks to Tan’s estimates.

<span class='see_also_inread'><b>See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='https://www.theedgesingapore.com/news/ma/chinas-milkyway-chemical-makes-2266-cents-go-lhn-logistics?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>China's Milkyway Chemical makes 22.66 cents GO for LHN Logistics</a></b></span>

As at 4.26pm, shares in LHN Logistics are trading flat at 21.5 cents.

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CGS-CIMB downgrades LHN Logistics to 'hold' after offer from Milkyway International

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