Kuala Lumpur Kepong Berhad (KLK) has proposed to acquire a 60 percent stake in PT Pinang Witmas Sejati from Ladang Lekir Sdn Bhd for RM 341.55 million.
The acquisition is expected to be completed in 3QFY20 and would be funded by a combination of KLK’s existing cash reserves and bank borrowings, according to RHB Retail Research.
“Excluding the debt and assuming the oil mill is worth about MYR80m, KLK is paying MYR33,975/ha for the planted landbank, or USD7,787/ha,” the research house said.
The acquisition is expected to add 6.6 percent to KLK’s planted landbank.
“At the end of FY 19 (Sep) KLK had a net gearing of 43%, which means it still has room to gear up if need be. Assuming it funds this acquisition entirely by debt, net gearing would rise to only 45 percent excluding the debt to be assumed,” the research house said in its trading notes today.
“Maintain BUY with unchanged SOP-based TP of RM 22.40. Our valuation comprises a 25x target P/E for its plantation unit, 15x for its manufacturing unit, and a 60 percent discount applied to the RNAV of its property landbank,” RHB Retail Research highlighted.
