Kfima ... Jul11

Sources say a corporate exercise could be in the offing in Kfima to extract better value for two listed companies in the group.

The major shareholders are looking at how the value of Kfima and its 60.9% owned subsidiary Fima Corp Bhd can be better reflected as the current structure is inefficient.

No specified have been hammered out as yet as the major shareholders are looking at various possibilities.

Roslan Hamir is MD for Kfima and Fima Corp.

Sources say both companies have fairly large plantation operations and it would make sense for them to operate under one roof.

Kfima is a conglomerate with businesses ranging from bulking terminal operations to property and plantations. It owns some 21235 ha of oil palm and pineapple plantations in Malaysia and Indonesia.

Fima Corp produces security and confidential documents in Malaysia. Apart from renting and managing commercial properties, it also involved in the palm oil sector and owns some 19794ha of agricultural land.

Indeed, both companies are relatively undervalued – trading at single multiples – and have healthy balance sheets. As at March 31, Kfima had rm151 million in net cash while Fima Corp’s net cash position stood at rm130 million.

If all the plantations are put under one roof, the structure would be more efficient.

A share swap – similar to Sunway Holdings and Sunway City – would be a better alternative. As both companies are trading at almost similar valuations, such a transaction is possible,

Kfima’s major shareholders are accumulating its shares. BHR Enterprise Sdn Bhd, Rozilawati Basir and Rozana Zeti Basir have been buying the company’s shares in June 2011.

It is worth nothing that BHP Enterprise is the largest shareholder in NationWide Express Courier Services Bhd with a 51.89% stake.

Valuations wise Kfima was trading at a historical PER of 11.1 times. As for Fima Corp, it was trading at a historical PER of 6.18 times.

Among the biggest plantations firms, Genting Plantations Bhd is trading at a historical PER of 17.21 times. It is worth nothing that Kfima and Fima Corp are not directly comparable with their plantation peers as the oil palm business only contributed 19.4% of Kfima’s PBT for FY2011 ended March 31 and 32.11% of Fima Corp’s FY2-11 PBT.

KFima was trading at discount to its net assets per share of rm1.76 as at March 31 or 0.94 times price to book. Fima Corp is trading at 1.29 times price to book based on its net assets per share of rm4.73.