- Kulim Bhd has proposed to acquire a 30% stake in Asia Logistics Council Sdn Bhd (ALC) from Johor Corporation for RM23.2mil. In addition, Kulim has proposed to lend US$25mil (RM91.4mil) to ALC.

- Currently, Kulim owns a 38% stake in ALC. After the acquisition, Kulim will be able to consolidate ALC’s earnings based on its equity interest of 68%.

- We are neutral on this development. It appears that Kulim is trying to find new sources of income after the disposal of New Britain Palm Oil Ltd.

- Nevertheless, we do not expect ALC to contribute significantly to Kulim’s bottomline. ALC recorded a net profit of RM564,217 in FY14.

- ALC’s business activities are to assist and monitor the deployment of an integrated logistics system in the Asia Pacific region.

- We are unsure if ALC’s contribution would be classified under Kulim’s shipping or “others” division in the future.

- Kulim’s shipping division recorded an operating profit of RM32mil in FY14, which accounted for about a third of the group’s pre-tax profit. Kulim’s “others” division recorded an operating loss of RM85.1mil in FY14.

- Maintain HOLD on Kulim. Ex-date of the group’s special dividends of 37.65 sen/share is 10 March 2015. Payment date of the dividend is 23 March 2015.

Source: AmeSecurities