P&O plans to pay only RM37mil in special dividends to shareholders

PETALING JAYA: Pacific & Orient Bhd (P&O) is planning to pay out only RM37mil in special dividends to shareholders from the total RM270mil it will receive from the sale of its insurance business. This works out to around 15 sen per share.

Since the announcement of the sale of its insurance business to South African financial group Sanlam Emerging Markets Proprietary Ltd in December 2012, P&O shares have generally been trending upwards.

P&O shares have added eight sen to-date since the announcement on Dec 10, 2012.

Its share price was pegged at RM1.27 on announcement date. It closed at RM1.35 yesterday with 939,900 shares done.

Kenanga head of research Chan Ken Yew said the market had speculated that P&O would pay more in dividends.

P&O will receive RM270mil in cash from the sale of its 49% stake in Pacific Orient Insurance Co Bhd (POI). Comparably, the total proceeds of RM270mil works out to around RM1.10 per share.

The company said it planned to use the majority of the proceeds or RM150mil for investments that would be identified later on.

Chan said P&O was most likely keeping the cash for the time being to enable it to identify a good business to invest in.

“This business would be one that complements its existing business,” he said.

He added that it was possible that the company would pay out another dividend in the near future.

Meanwhile, RM48mil will be utilised for the repayment of its bank borrowings while RM28.3mil has been set aside as working capital while the remaining RM6.7mil will be used for expenses related to the divestment.

The proposed divestment is expected to be completed by the first half of 2013. Once completed, P&O would still hold a 51% stake in POI, while Sanlam would hold the remainder stake.

“Sanlam is strategically an ideal fit for P&O. Its rationale to acquire P&O's leading general insurance franchise is to gain an immediate access into the Malaysian market.

“In addition, P&O can tap into Sanlam's strength in portfolio investment and this should help boost P&O's investment income,” said Kenanga analysts in a research note.