• Felda Global Ventures’ 72%-owned subsidiary, Felda Palm Industries has proposed to sell its 30% stake in Taiko Clay Chemicals to Orient View Sdn Bhd for RM145mil cash.

• Directors of Orient View include Datuk Lee Soon Hian.

• Based on Taiko’s FY17 net profit of RM61.7mil, the selling price of RM145mil for the 30% stake would imply a PE of 7.8x.

• Based on Taiko’s latest net asset value of RM509.3mil, the selling price would translate into a price-to-net asset value of 0.9x.

• Taiko Clay Chemicals is involved in the manufacturing and sale of bleaching earth products and chemicals such as sulphuric acid, oleum and battery acid. Taiko Clay Chemicals is 62%- owned by Taiko Chemical Industries and 8%-owned by Batu Kawan.

• The disposal is in line with FGV’s strategy of selling non-core assets. FGV’s other non-core assets are FGV Cambridge Nanosystem, which is involved in grapheme applications and the travel unit.

• FGV is expected to recognise a one-off disposal gain of RM16.1mil from the sale of the 30% stake in Taiko Clay Chemicals.

• FGV is anticipated to use the disposal proceeds of RM145mil as working capital. Since 1997, Felda Palm Industries has received dividends of RM58.6mil from Taiko Clay Chemicals.

• Maintain HOLD on FGV with a fair value of RM2.00/share.

Source: AmInvest Research - 15 May 2018