Monday, November 22, 2010

LIONFIB - BIG LET DOWN IN THE PROPOSED CAPITAL DISTRIBUTION

Under the announcement made by LIONFIB today, only RM58.00 million (i.e. at RM0.25 per ordinary share) will be distributed to its shareholders from proceeds received from the sale of its Malaysian tyre business, the entitlement date for which shall be determined after the completion date of sale.

This is a huge disappointment, indeed. Under the circumstances, we would recommend a HOLD or CUT LOSS & BUY LATER AT LOWER PRICE.

We believe that there is still upside upon announcement of the entitlement date after completion of sale in early 2011. However, the quantum is significantly lower than we anticipated.

We note that RM200 million is earmarked for investments to be identified and RM141.57 million will be for LIONFIB's working capital in its principal activities in the trading of building materials and steel products. In the event there is any change in part of the proceed's usage to capital distribution to the shareholders, there may then be further upside on this counter.

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