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