Kluang ... Nov10

Sources say a corporate exercise could be imminent. There is speculation that a possible general offer, sale of assets or a hefty dividend could be in the offing.

Kluang Rubber Co (Malaya) Bhd is Kuchai major shareholder. Kluang holds about 42 per cent of Kuchai. Kuchai holds 26 per cent of Sungei Bagan Rubber Co (Malaya) Bhd.

In its 2009 annual report, Kuchai had enough tax credits to pay RM8.53 million in normal dividends and RM8.96 million as tax-free dividends. If the balance of the retained earnings of RM52.23 million were to be distributed as dividends, the company might distribute such dividends under the single-tier system.

The asset revaluation gains in these firms may have prompted investors and their shareholders to see value emerging in these stocks.

Speculation that a general offer for these companies is possible, taking into account the asset base of these cash rich and debt free entities. It is also worth nothing that their financials have improved due to revaluation gains for their investment properties and securities, which comprise listed and unlisted investments.

On a price to book ratio, Kluang was trading at 0.5 times while Kuchai and SBR transacted at 0.6 times on their latest reported net assets.

In PER terms, Kluang traded 21.1 times against a peer average of 15.5 times. Kuchai were trading at a 2.6 times against a peer of average of 13.5 times while SBR transacted at 15.3 times against the average of 15.7 times.

Kluang’s net assets per share stood at RM6.26. The company has a cash pile of RM43 million, which translates into net cash per share of 71 sen. The  company owns a 639ha freehold oil palm estate in Kluang, Johor. Value of its investment in securities jumped to Rm27.34 million.

Kuchai’s net assets share stood at RM2.35. The company has a cash pile of RM23 million, which translates into 19 sen per share. Its freehold properties had a combined value of RM12 million comprises a shophouse in Singapore and a 3.2ha plot of unused mining land in Ulu Langat. The value of its investment in securities rose to RM144 million.

SBR’s net assets per share stood at RM5.74 million. The firm’s cash pile stood at RM122 million and net cash per share was RM2.02. Its properties had a collective value of RM22 million. These comprises a 1098ha freehold oil palm estate in Machang, Kelantan and a leasehold residential property in London. The value of its investments in securities jumped to RM103 million.

Kluang Rubber is the largest shareholder in Kuchai Development with 41.91% stake and the largest in SBR, with a 31.89% stake. Singapore based The Nyalas Rubber Estates Ltd, meanwhile is the largest shareholder in Klaung Rubber with 34.2% equity interest.