KLK ... Jan 2009

It has proposed to allocate about RM1.32bil to buy back up to 10% of its paid-up capital.
It is seeking their mandate for the buyback, the 10% stake would amount to 106.4 million shares. The funding for the proposed authority to buy back shares will be sourced wholly from internal funds. The RM1.32bil represented the audited retained earnings of the company as at Sept 30 2008.

However, the actual number of shares to be purchased, the total amount of funds to be utilised, the impact on cashflow and the timing of the purchase would depend on the prevailing equity market conditions and the company’s financial resources.

The proposed share buyback, if exercised, was expected to enhance the group’s earnings per share (EPS). The increase in EPS, if any, arising from the proposed authority to buy back shares may have a positive effect on the market price of KLK shares. Therefore, long-term investors are expected to enjoy a corresponding increase in the value of their investments in the company.

The board said if the shares bought back were kept as treasury shares, it would give the directors an option to sell them at a higher price and therefore make an exceptional gain for KLK without affecting the total issued and paid-up capital of the company.

Alternatively, the shares so purchased can be distributed as share dividends to shareholders and, if undertaken, would serve to reward KLK shareholders.

As at Dec 1 2008, the public shareholding spread of KLK was about 36.94%. Assuming the proposed authority to buy back shares was carried out in full on Dec 1 2008, the pro-forma public shareholding spread of the company would be reduced to 29.94%.

The audited net asset of the KLK group as at Sept 30 2008 was RM5.54bil, representing a net asset per share of RM5.20. Based on the fourth-quarter results ended Sept 30 2008, KLK had cash and cash equivalents of RM1.16bil.

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