KLK  announced  that  its  wholly-owned  subsidiary,  KLK  Emmerich  GmbH had on 26 May 2015 entered into a conditional Asset Purchase Agreement to acquire the oleochemical assets and business of Emery Olechemicals GmbH (Emery) in Holthausen, Germany for €40.5m or RM162m subject to adjustments. Emery is held in equal shares by Sime Darby Plantation and PTT Chemical International. (Source: Bursa Malaysia)

Comments: The proposed acquisition is not expected to have a significant impact  on  our  FY15E-17E  core  net  profit  forecasts  for  KLK.  It  would however complement KLK’s existing fatty acids and glycerine business in Europe.  The  KLK  Group  currently  has  thirteen  resource-based manufacturing  plants  located  in  Malaysia,  China  and  Europe  with  a  total capacity of 2.0m MT p.a., to be further expanded to 2.2m MT in FY15 and 2.4m MT in FY16. The proposed acquisition is expected to be completed in 3Q15.

KLK is currently rated at HOLD with a TP of RM22.79 but the share price is declining  towards  the  BUY  level.

Source: Affin Hwang Capital Research - 28 May 2015