THE BUZZ
KNM announced yesterday on Bursa Malaysia that it has approved the appointment of UOB Bank as the sole manager, underwriter and placement agent for the listing of Borsig, its wholly-owned subsidiary, on the main board of the Singapore Stock Exchange (SGX). The proposed listing will be subjected to the approval of the KNM shareholders and compliance with the rules and regulations of Bursa Malaysia.
OUR TAKE
Indicative valuation of RM1.8bn-RM1.9bn for Borsig. To recap, KNM paid EUR350m for Borsig, a German company whose units develop, manufacture, install and maintain plants and processing equipment in the chemical, petrochemical, oil and gas, power and
industrial services industries. While not much information was stated in the announcement, we understand that Borsig is expected to fetch a valuation of some RM1.8bn-RM1.9bn, which is not much above the RM1.7bn it paid for the company.
Indicative valuation of RM1.8bn-RM1.9bn for Borsig. To recap, KNM paid EUR350m for Borsig, a German company whose units develop, manufacture, install and maintain plants and processing equipment in the chemical, petrochemical, oil and gas, power and
industrial services industries. While not much information was stated in the announcement, we understand that Borsig is expected to fetch a valuation of some RM1.8bn-RM1.9bn, which is not much above the RM1.7bn it paid for the company.
Company could turn net cash in FY13. Assuming that KNM disposes of a 25%-30% stake in Borsig, the listing exercise could fetch some RM450m-RM540m, based on a valuation of RM1.8bn for Borsig. Hence, the company would turn net cash in FY13 and the exercise should reduce the intangible assets on KNM’s balance sheet as we believe bulk of it was made up of the Borsig acquisition.
Positive for the share price in the short term. We believe there will be more upside to KNM’s share price in the short term since the stock is traditionally driven by positive news flow.
Fair value (FV) under review. As not much information is shared in the announcement, we are maintaining our forecasts for now pending updates from management. We are thereby putting our rating and fair value under review. We previously valued the share at RM0.80, based on the existing 13x FY12 EPS and had a NEUTRAL recommendation on the stock.
Fair value (FV) under review. As not much information is shared in the announcement, we are maintaining our forecasts for now pending updates from management. We are thereby putting our rating and fair value under review. We previously valued the share at RM0.80, based on the existing 13x FY12 EPS and had a NEUTRAL recommendation on the stock.
Source: OSK
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