KUALA LUMPUR, Aug 1 — Affin Investment Bank Bhd is positive on the prospects of Sime Darby Bhd acquiring Kulim (M) Bhd’s equity stake in New Britain Palm Oil Ltd (NBPOL).
In a note today, the investment bank also maintained its “add” rating on Sime Darby with an unchanged price target of RM10.52 from RM9.50.
“There will be avenues for earnings enhancement through operational synergies, provided Sime Darby has full management and operational control over NBPOL,” said Affin Investment Bank.
Yesterday, Sime Darby announced that Kulim had selected the conglomerate as the preferred party with which to negotiate a sale of all of Kulim’s 49 per cent equity interest in NBPOL.
Kulim has now entered into exclusive discussions with Sime Darby to finalise the terms of the transaction.
For Sime Darby, Affin Investment Bank said funding an acquisition of around RM2 billion was not an issue, as the core businesses were profitable and the group was sitting on a cash reserve of RM4.2 billion as of March 31, 2014.
NBPOL closed at £5.19 (RM28.13) on the Main Board of the London Stock Exchange yesterday.
“Coupled with the low yield on its cash reserves, a final deal at around the current price of £5.19 is expected to enhance earnings per share and valuation for Sime Darby,” said Affin Investment Bank.
At the lunch break today, Sime Darby rose five sen to RM9.55, with 2.007 million shares changing hands. — Bernama
