KUALA LUMPUR: Cahya Mata Sarawak Bhd
(CMS) has proposed to get rid of its stake in OM Sarawak for US$120mil, which is able to unlock the value of its investment and unencumber working capital.
According to TA Securities analysis’s back-of-the-envelope calculation, the money consideration of US$120mil will translate into an acquisition price-earnings ratio of about six instances FY21 earnings.
“While the supply PER of 6.0x appears low-cost, we expect it was distorted by exceptionally strong earnings in FY21, thanks to the excessive common promoting costs of metal all through 2021.
“Therefore, if we use our projected earnings in FY22 for OMS, the acquisition PER will translate into about 9.0x, which is in line with the sector valuation of constructing supplies in Malaysia.
“Overall, we consider the deal is truthful, and we’re largely impartial on the proposed disposal,” it mentioned.
The analysis agency mentioned the gross sales proceeds might be used as working capital to kickstart the operation of Phase 1 of the built-in phosphate complicated in Samalaju Industrial Park, or to pare down borrowings.
Assuming that every one the proceeds are used for the compensation of money owed, the group can have web money of RM167.9mil from web debt of RM352.8mil as at 4QFY21, it mentioned.
However, there may be additionally anticipated to be an earnings hole ensuing from the disposal.
Based on tough estimates, TA Securities mentioned the disposal by CMS to OM Holdings Bhd will consequence in up to 30% FY22 earnings per share discount in the previous after taking out all of the earnings contribution from OM Sarawak.
“Therefore, we consider it should take a while for the group to replenish the earnings vacuum,” mentioned the analysis agency.
TA Securities maintained its “purchase” name with a goal value of RM1.70 a share.
