Journey to Wealth
Kulim - Sells parking business for RM13.5mil BUY
- Kulim Bhd's subsidiary, Sindora Bhd, has proposed to dispose of its parking business to Damansara Realty Bhd for RM13.5mil.
- Damansara Realty shares the same holding company as Kulim Bhd, i.e. Johor Corporation.
- The parking business is undertaken by Metro Parking (M) Sdn Bhd and is classified under Kulim's 'Intrapreneur Ventures' division.
- We view the disposal of the parking business positively as it appears that Kulim is gradually disposing of its non-plantation assets.
- Apart from Metro Parking, the other business activity in the 'Intrapreneur Ventures' division is the shipping operations, which generate the bulk of the division's profits.
- The 'Intrapreneur Ventures' division recorded an EBIT of RM37.5mil and revenue of RM169.9mil in FY11.
- Based on the parking business' net profit of RM1.1mil for FY11, the selling price of RM13.5mil would translate into a PE of 12.3x. We believe this to be fair.
- Kulim would record a gain on disposal of RM11mil.
- The disposal of the parking business also includes a profit guarantee to the buyer. Metro Parking has to achieve a net profit of not less than RM2.5mil for FY12F.
- If the actual net profit is less than RM2.5mil, then Sindora would have to pay Damansara Realty 75% of the shortfall amount.
- We maintain a BUY on Kulim for a potential increase in dividends to be paid from the capital repayment proceeds of the disposal of QSR Brands and KFC Holdings. Additionally, Kulim would be a purer plantation company.
Source: AmeSecurities
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