Kulim - Sells part of shipping assets BUY

- Kulim Bhd has proposed to dispose of its effective interest of 35.86% in Orkim Sdn Bhd for RM110mil or RM5.73/share. 

- Orkim will be sold to Trident Hallmark Sdn Bhd, which is involved in the oil and gas industry. Directors of Trident include Tan Sri Abdul Rashid bin Abdul Manaf.

- Orkim is involved in the shipping industry. It manages two vessels owned by a third party for an oil and gas company. 

- Apart from this, we believe that Orkim also owns five tankers with total capacity of 44,000 DWT.  

- Kulim would be realising a gain on disposal of RM72.4mil. The proposed disposal is targeted for completion by 1QFY13. Kulim would be using the disposal proceeds for working capital.

- We are neutral on this development although it suggests that Kulim could be heading towards disposing its entire portfolio of shipping assets. 

- Apart from Orkim, Kulim still has a 51% shareholding in EA Technique Sdn Bhd, which owns eight tankers with total capacity of 85,000 DWT. 

- In 9MFY12, Kulim’s shipping division recorded an EBIT of RM47.6mil, which accounted for 12% of pre-tax profit. 

- The EBIT of RM47.6mil in 9MFY12 was 118.2% YoY higher than the earnings of RM21.8mil recorded in 9MFY11. 

- As at end-FY11, net asset of the intrapreneur ventures division (comprising mainly shipping activities) stood at RM93.8mil.  

- We maintain a BUY on Kulim for its special dividend of 82-93 sen/share. We believe that it would be paid by 1QFY13.  

Source: AmeSecurities