AmWatch - Kulim (M) : Increasing stake in logistics company HOLD, 9 Mar 2015

STOCK FOCUS OF THE DAY

Kulim (M) : Increasing stake in logistics company               HOLD

Kulim Bhd has proposed to acquire a 30% stake in Asia Logistics Council Sdn Bhd (ALC) from Johor Corporation for RM23.2mil. In addition, Kulim has proposed to lend US$25mil (RM91.4mil) to ALC. Currently, Kulim owns a 38% stake in ALC. After the acquisition, Kulim will be able to consolidate ALC’s earnings based on its equity interest of 68%. We are neutral on this development. It appears that Kulim is trying to find new sources of income after the disposal of New Britain Palm Oil Ltd.

Nevertheless, we do not expect ALC to contribute significantly to Kulim’s bottomline. ALC recorded a net profit of RM564,217 in FY14. ALC’s business activities are to assist and monitor the deployment of an integrated logistics system in the Asia Pacific region. We are unsure if ALC’s contribution would be classified under Kulim’s shipping or “others” division in the future. Kulim’s shipping division recorded an operating profit of RM32mil in FY14, which accounted for about a third of the group’s pre-tax profit. Kulim’s “others” division recorded an operating loss of RM85.1mil in FY14.

Maintain HOLD on Kulim. Ex-date of the group’s special dividends of 37.65 sen/share is 10 March 2015. Payment date of the dividend is 23 March 2015. 

Others :

Economic Update : Exports contract during the start of the year

QUICK TAKES

Genting Plantations : To build refinery in Lahad Datu       HOLD

Water Sector : Third extension unlikely                                  NEUTRAL

Plantation Sector : Newsflow for week 2-6 March             NEUTRAL

NEWS HIGHLIGHTS

Jaya Tiasa Holdings : Sees silver lining in timber trade

SapuraKencana Petroleum : Mokhzani: No plans to up stake in Yinson for now

Oil Palm Sector : Oil palm industry concerned over unabated increase of production costs