- Maintain BUY on Benalec Holdings with an unchanged fair value of RM1.31/share – a 45% discount to its sumof-parts (SOP) value.

- Benalec announced on Bursa Malaysia that it has on 4 December, reached an agreement with Datuk Leaw Tua Choon, Datuk Leaw Ah Chye and Leaw Yongene following the signing of a heads of agreement (HoA).

- The HoA provides the platform to settle all legal suits, grievances, disputes and claims between all the parties involved.

- At the same time, Benalec also disclosed that its whollyowned unit Benalec Diversity Sdn Bhd has agreed to withdraw its civil suits against Tua Choon and Ah Chye, Yongene and Citypoint Engineering Sdn Bhd.

- Following the signing of the HoA, the parties involved would proceed to immediately negotiate and finalise the terms to reach a final settlement within a month. At the same time, both Tua Choon and Ah Chye have also stepped down as directors of Benalec.

- This latest development is positive, as the agreements reached between the controlling Leaw family (with ~53% stake in Benalec via OceanCove Sdn Bhd) will allay uncertainties over a recent management shake-up, and its associated legal implications.

- We also draw comfort from the fact that senior management personnel are already deployed to take active charge of the duties left vacant. On the other hand, Group MD Dato’ Vincent Leaw and his professional team are very hands-on in managing the group, especially for its operations in Johor.

- More importantly, we see a positive resolution for a smooth transition within the Benalec group; it is consolidating its focus to develop the Tg.Piai land in South Johor into a future oil hub.

- All eyes would be on the 11 December deadline for Benalec to finalise the terms of a SPA with 1MY Strategic Oil Terminal Sdn Bhd to develop 1,000 acres of oil-tankage facilities at Tg.Piai.

- While we do not rule out a possible extension to the deadline – given the sheer size, complexity and huge investments of the deal involved – the investment merits of Tg.Piai remain.

- Furthermore, we expect Benalec’s near-term valuations to be supported by land sales of c.RM254mil for 181 acres of it concessions in Malacca, which will be progressively recognized from 2QFY14 onwards.

Source: AmeSecurities