KUB ... Mar12

Sources say KUB is said to have been successful in its bid for Shell LPG business in Malaysia, held under its listed arm Shell Refining Co.

According to sources, KUB was willing to pay between rm300 million and rm350 million for Shell’s Malaysian PLG business.

Nonetheless, based on rm50 million pre tax profits, a value of rm300 million to rm350 million for the LPG business would mena a minimum of six times earnings. When Shell sold its Singapore LPG business, it was at 10 times earnings.

Shell has been gradually disposing of its LPG business globally. Given that the LPG business deals mostly in cash, the division had contributed to Shell Malaysia’s cash pile.

On the flipside, Shell’s LPG business would help to provide a boost and give anchor to the KUB group, which is currently in the red.

Obtaining Shell’s LPG business would help turn KUB’s energy division around. In terms of top line contribution, the energy business accounted for 59.3% of revenue for FY2011 ended Dec 31.

KUB’s LPG business is not considered as one of the company’s core segments. However KUB had stated previously that if it managed to obtain Shell’s local LPG business, then the company would work on reshuffling its portfolio.

KUB already appears to be undergoing an internal organization judging by the slew of announcements concerning changes to the board.

The new management setup at KUB and its prospect of securing Shell’s local LPG assets are certainly worth watching.

It is UMNO linked holds a 29.6% stake while the Ministry of Finance owns a 22.5% stake.