Monday 21 May 2012

Kulim - Announces special dividend of 93 sen/share BUY


- Following QSR Brands’ and KFC Holdings Bhd’s capital repayment exercise, Kulim Bhd has announced that it would be receiving proceeds of RM1.157bil. 

- Subsequently, Kulim has proposed to distribute all of the RM1.157bil proceeds in the form of a special dividend to its shareholders.

- Kulim’s special dividend would amount to about 93 sen/share based on the share base of 1.235bil. After the conversion of warrants, we reckon that the special dividend would amount to 82 sen/share. 

- We believe the special dividend would be paid in 3QFY12. The date of the payment of the special dividend was not disclosed in the Bursa announcement.

- Recall that Kulim owns 54% of QSR Brands, while QSR Brands owns 51% of KFC Holdings. However, after the conversion of warrants, we estimate that Kulim’s shareholding in QSR would be 48% while QSR’s equity interest in KFC would be about 49%.

- The announcement of the special dividend was not a surprise. Following the privatisation exercise of QSR and KFC by Massive Equity Sdn Bhd, the market had been expecting Kulim to return part of the capital repayment proceeds back to shareholders. 

- What was a surprise was the size of the special dividend. We were not expecting Kulim to distribute all of the capital repayment proceeds as a special dividend. 

- We had thought that Kulim would keep part of the proceeds for future expansion plans. Still, we reckon that Kulim would not face any problems financing its future expansion plans as its balance sheet is healthy. 

- At the company level, the group’s gross cash stood at RM74.8mil as at end-FY10 while gross borrowings amounted to RM373.2mil. 

- Most of Kulim’s borrowings are held by New Britain  Palm Oil Ltd (NBPOL). NBPOL’s borrowings would be deconsolidated in the future as it will be classified as an associate. 

- We maintain a BUY on Kulim for the special dividend of 93 sen/share. The group would also be a purer plantation company after the disposal of KFC and QSR.  

Source: AmeSecurities 

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