• Mega First Corporation (MFCB) has proposed to subscribe to a 64% stake in CSC Agriculture Holdings (CSCAH) for RM25mil.

• The stake will be acquired from CSCAH’s existing shareholders i.e. CSC Chin Family Sdn Bhd, Chin Boon Tak, Chin Boon Ching and Chin Boon Thiam.

• CSCAH is involved in the planting and selling of fruits and vegetables using innovative farming techniques and automated planting processes.

• The consideration of RM25mil was arrived at after accounting for the fair value of the plantation assets, land and buildings.

• We are neutral on this development. Earnings contribution from the fruit and vegetable venture is not expected to be significant. MFCB’s earnings are mainly driven by the Don Sahong Hydropower Plant in Laos, which accounted for 88% of group EBIT in FY23.

• The earnings and net book value of CSCAH were not disclosed. The purchase consideration of RM25mil for a 64% stake values CSCAH at RM39.1mil.

• Assuming an earnings yield of 10%, CSCAH will improve MFCB’s net profit by less than 3%.

• We maintain BUY on MFCB with an unchanged fair value of RM5.40/share, based on a FY25F PE of 10x. MFCB is currently trading at a decent FY25F PE of 9x, which is below its 5-year average of 10x.

Source: AmInvest Research - 9 May 2024