THE BUZZ
KL Kepong (KLK)
has entered into an
unconditional agreement to dispose of its 100% stake in personal care
retail chain Crabtree & Evelyn (C&E) for USD155m. The disposal will
result in a one-off gain of USD41m in FY12.
OUR TAKE
We are not surprised by this
move as management has hinted
several years ago that it intends to sell C&E, but not at bargain prices.
Some two years ago, KLK revamped C&E’s operations globally in an attempt to
shore up its profitability before selling it. We applaud management for biting
the bullet and exiting a non-core business, as well as the patience to do what
was necessary to maximize value from C&E.
The group said it will deploy the proceeds to expanding its
plantation operation and/or oleochemicals
segment. Separately, KLK also announced last night that it is buying a 90% stake
in PT Global Primatama Mandiri (GPM) for RM3.6m. GPM holds izin lokasi
(location rights) for 7,400 ha in East Kalimantan. Assuming a cost of planting
to maturity of USD6,000 per ha, the project will cost KLK some USD45.6m. Hence,
the USD115m proceeds from C&E will allow KLK to add some 18,500 ha of oil
palm plantation to its stable over time, if developed from green field.
Maintain Neutral on
KLK as the stock is trading near our fair value.
Source: OSK188
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