MARKET DEVELOPMENT
Affin Research: No Significant Impact on KL Kepong From Tensa Purchase
Affin Research: No Significant Impact on KL Kepong From Tensa Purchase
12/08/2014 (The Star) - Affin Investment Research does not expect Kuala Lumpur Kepong Bhd's (KLK's) proposed acquisition of Tensa Chem SA to significantly impact the group.
KLK had signed a deal with GRI Group Ltd and three individuals on Monday for the sale and purchase of the entire issued and paid-up capital of TensaChem for 16.2mil pound sterling (RM70.4mil), on a debt free cash free basis.
The proposed acquisition, however, is subject to anti-competition clearance from the Federal Cartel Office of Germany.
However, no guidance on revenue, margin and profit were given in the filing with Bursa Malaysia.
Affin Research said on Tuesday: "However, manufacturing margins are generally within the range of 5% and given the size of the purchase consideration, we do not expect the impact of the acquisition to be significant."
The acquisition is expected to be completed within two months and will expand KLK's oleochemical business in Europe, where it owns a few businesses.
KLK owns the KLK Emmerich plant in Germany, which produces a range of fatty acids, hydrogenated fatty acids and glycerine; Kolb in Switzerland that produces non-ionic surfactants; and Standard Soap in the United Kingdom that manufacturers soap and toiletry products.
Affin Research said, including Malaysia and China, the group owns a total of 11 oleochemical plants with a combined capacity of approximately 1.8 million metric tonne per annum.
The research house maintains its financial year ending Sept 30, 2014 to 2016 net profit forecasts, with the assumption that crude palm oil (CPO) average selling price is RM2,700 per tonne for 2014, and RM2,850 per tonne for 2015 to 2016, with a target price of RM26.44.
While it maintains an "add" rating on the stock, Affin Research said the key downside risks include an economic slowdown in KLK's key markets; high production of vegetable oils and changes in rules and regulations dampening CPO prices; and limits on land ownership and shareholdings by foreign investors in Indonesia, among others.
KLK had signed a deal with GRI Group Ltd and three individuals on Monday for the sale and purchase of the entire issued and paid-up capital of TensaChem for 16.2mil pound sterling (RM70.4mil), on a debt free cash free basis.
The proposed acquisition, however, is subject to anti-competition clearance from the Federal Cartel Office of Germany.
However, no guidance on revenue, margin and profit were given in the filing with Bursa Malaysia.
Affin Research said on Tuesday: "However, manufacturing margins are generally within the range of 5% and given the size of the purchase consideration, we do not expect the impact of the acquisition to be significant."
The acquisition is expected to be completed within two months and will expand KLK's oleochemical business in Europe, where it owns a few businesses.
KLK owns the KLK Emmerich plant in Germany, which produces a range of fatty acids, hydrogenated fatty acids and glycerine; Kolb in Switzerland that produces non-ionic surfactants; and Standard Soap in the United Kingdom that manufacturers soap and toiletry products.
Affin Research said, including Malaysia and China, the group owns a total of 11 oleochemical plants with a combined capacity of approximately 1.8 million metric tonne per annum.
The research house maintains its financial year ending Sept 30, 2014 to 2016 net profit forecasts, with the assumption that crude palm oil (CPO) average selling price is RM2,700 per tonne for 2014, and RM2,850 per tonne for 2015 to 2016, with a target price of RM26.44.
While it maintains an "add" rating on the stock, Affin Research said the key downside risks include an economic slowdown in KLK's key markets; high production of vegetable oils and changes in rules and regulations dampening CPO prices; and limits on land ownership and shareholdings by foreign investors in Indonesia, among others.