LION FOREST INDUSTRIES BHD
Primary Symbol & Exchange: LIONFIB
8486 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 19/11/2010 RM:2.44
Mkt Cap RM’m : 562.10
Shares (m): 230.37
Par RM: 1.00
SECTOR CLASSIFICATION
MSEB: Consumer Products
Fox Capital: Trading/Services
Executive Chairman: Tan Sri William Cheng Heng Jern
Managing Director: -
KNOWN MAJOR SHAREHOLDER(S) (as at 30/9/2009)
Amsteel Mills Sdn Bhd + 53.67%
Lion Industries Corporation Bhd 19.56%
+ 99% owned subsidiary of Lion Industries Corporation Bhd (effective combined interest at ~ 73%)
BACKGROUND
LIONFIB’s prime asset used to be it 97.8% stake in Sabah Forest Industries (SFI) until its disposal in FYE 2007. The disposal for SFI for USD261 million (or RM945 million) cash in FY 2007 altered the profit structure considerably in FYE 2008. Some 45% (or RM421 million) of the hefty cash proceeds was utilized for subsequent capital repayment to the shareholders at RM2.00 each. Part of the proceeds was also utilized to expand its presence in tyre manufacturing. On 28/11/2008 (or 2QFY2009), LIONFIB acquired Silverstone via issuance of 19.93 million new shares which lifted the capital base by 9.4% in FY 2009.
LATEST DEVELOPMENT
Lion Forest Industries Bhd (LIONFIB) is selling local tyre business, Silverstone Bhd, to Toyo Tire & Rubber Co Ltd, Japan’s fourth largest tyre manufacturer, for RM462 million. The Japanese tyre maker will buy over a 100% equity stake in Silverstone Bhd. Lion Forest Industries Bhd (LFIB) owns an 84.16% stake in Silverstone. The deal values Silverstone at 1.62 times its consolidated net assets of RM285.67 million as at June 30 2010, and 13.76 times its net profit of RM33.57 million. It is learned that Silverstone has minimal borrowings of about RM20 million.
The proposed divestment is expected to boost LIONFIB’s cash pile to RM869.4 million, or RM3.77 gross cash per share. LIONFIB’s share price closed at RM2.44 on 19/11/2010 which gave the company a market value of RM562.1 million. Its net asset per share was RM4.68 as at June 30 2010. LFIB was holding RM407.38 million in cash as at June 30 2010, against total borrowings of RM36.58 million.
Nonetheless, a portion of its current cash pile is being held in an escrow account as a contingency fund for the claims sought in several legal suits filed over the timber concession it held previously in Sabah.
For LIONFIB, the proposed deal is expected to result in an estimated gain of about RM140million for FY2011 ending June 30, which translates to an increase in earnings per share of about 60 sen.
“The Silverstone deal is Toyo Tire’s first ever cross-border acquisition. The timing was right for the company to expand its reach with the strengthening of the yen,” said a source close to the deal.
On the use of the “Silverstone” brand by LFIB’s tyre manufacturing operations in China, the source says Toyo Tire would work out a separate arrangement with LFIB on the matter. LFIB’s tyre operation in China is held under a different subsidiary,
Shandong Silverstone LuHe Rubber & Tyre Co Ltd. The China business is not a part of Silverstone that is being sold to Toyo Tire.
Both LFIB and Toyo Tire expect the Silverstone deal to be completed by the end of January next year.
Following the disposal of Silverstone, LFIB will be left with its tyre manufacturing operations in China, trading and distribution of building materials such as steel bars, cement, roofing and wall tiles, and distribution of petroleum-based products and automotive components.
LFIB posted a net profit of RM163.75 million or 65.38 sen a share for FY2010, on revenue of RM873.62 million.
POTENTIAL DISTRIBUTION OF SPECIAL DIVIDEND OR CAPITAL REPAYMENT
Recent examples for share price boost after announcement of distribution of Special Dividend:
1) Eurospan Holdings Bhd (Eurosn) - 7094
- Surprise of a special single-tier dividend of 40 sen/share given its strong cash hoard of RM30.5 million or 75 sen/share @ August 2010.
Announcement date: 25/10/2010
Ex date: 6/1/2010
Pay out date: 24/1/2010
Closing price as at 25/10/2010 : RM1.16
Closing price as at 26/10/2010: RM1.41 (open: RM1.50, high: RM1.50, low: RM1.39)
Gain: 25 sen/share or 21.6% from previous closing price
2) Fraser & Neave Holdings Bhd (F&N) - 3689
- Announcement of special dividend of RM1.10/share + final single tier dividend of 38 sen. The proposed special dividend payment arose from sale of its glass container business – Malaya Glass Products Sdn Bhd that boosted its cash coffer to > RM1 billion.
Announcement date: 8/11/2010
Ex date: 8/12/2010
Pay out date: 6/1/2010
Closing price as at 8/11/2010 : RM14.62
Closing price as at 9/11/2010: RM15.70 (open: RM15.30, high: RM16.00, low: RM15.30)
Gain: RM1.08/share or 7.39% from previous closing price
Per OSK Research’s analysis, potential special dividend is at RM1.38 per LFI share. In order to gauge the potential dividend payout by LIONFIB, we must first compute the potential net cash proceeds that LFI may receive upon completion of the disposal. SCB has issued bonds, for which the Net Present Value (NPV) stood at approximately RM320m and are currently fully owned by LIONFIB. Thus the bond will obviously be redeemed prior to any cash distribution by SCB.
The remaining cash will also be used to pay for advisory fees and other expenses before being distributed back to its shareholders. Adding the proceeds from the bond redemption by SCB to LIONFIB and a 84% share of the balance, the possible amount available for distribution would be about RM400m.
Tracking the disposal of Sabah Forest Industries SB (SFI) by LFI in 2007, the subsidiary made a total dividend payout of RM2 per share, or 78.8% of the total proceeds, after excluding the RM363.4m set aside in an Escrow account for the litigation claims against SFI.
Assuming a payout of 80% from the cash proceeds received from LIONFIB, the special cash dividend may come to RM1.38 per share, with a dividend payable to Lion Industries of as much as RM233.6m. The remaining 20% will likely be retained for SCB and LIONFIB to search of a new core business as the group will left with its tyre manufacturing operation in China and trading of building material plus petroleum based products, which only generate nominal earnings.
Taking the similar positive effect on Eurosn & F&O after announcement of special dividend payout, LIONFIB share price is expected to achieve gain of at least RM1/share if special cash dividend of RM1.38/share is declared
No comments:
Post a Comment