- MISC announced that the planned disposal of its wholly-owned subsidiary, MISC Integrated Logistics Sdn Bhd (MILS) to Golden Age Logistics Sdn Bhd (GAL), a subsidiary Utusan Printcorp Sdn Bhd, has fallen through.

- MISC said the RM250mil proposed disposal was terminated because GAL was not able to fulfill its obligations for completion as stipulated in the agreement for sale and purchase.

- The condition stated in the agreement included approvals from relevant regulatory authorities, letter of consent from MILS’ financier or lenders, and letter of confirmation from Petronas.

- The RM250mil consideration was earlier arrived at after taking into account MILS’ book value of RM246.5mil, implying 1x P/B and 15x FY13 P/E.

- MILS’ principal activities includes the provision of project logistics and supply chain management which includes freight management, forwarding, transportation, and dry and cold warehousing.

- We are neutral on this, as we think the transaction would have had minimal impact on MISC. As at September 2014, MILS reported 9MFY14 revenue of US$85mil (4% of group revenue) and pretax profit of US$0.7mil (<1% total PBT). Its cash balance stood at RM5.7bil, with net gearing of 0.16x.

- We believe MISC will still attempt to dispose of MILS going forward, in its efforts to divest its non-core integrated logistics business and focus on its core businesses, i.e. the energy and petroleum-related shipping businesses.

- Maintain NEUTRAL.

Source: AmeSecurities