Quick take: Dolomite jumps 175% on disposal of quarry unit to Sunway

KUALA LUMPUR: Shares of Dolomite Corp Bhd jumped 175% in early trade Tuesday after the company announced plan to sell its unit to Sunway Group for RM125mil.

The counter, the third most active on Bursa Malaysia, surged 175%, or 14 sen to 22 sen with over 18 million shares traded.

Sunway Bhd is buying 784 acres of leasehold land in Ulu Langat, Selangor with the quarry plant and machinery from Dolomite Corp Bhd for RM125mil.

Dolomite said Sunway Holdings Sdn Bhd has signed a share sale agreement with Dolomite Industries Co. Sdn Bhd to acquire its quarry unit – Dolomite Granite Quarry Sdn Bhd and four parcels of land.

The purchase of the quarry unit was for RM100 while the land and machinery was for RM125mil. The purchase excluded the premix plant and mobile machinery on the four parcels of land.

The proposed acquisition was expected to be completed by the third quarter of 2019.

RHB Research is positive on Sunway’s new acquisition of Dolomite’s quarry as it would immediately boost Sunway’s market share in quarry/aggregate business to 22% within the Klang Valley region (from 15%) and 15% nationwide (from 10%).

Also, It said Sunway’s quarries and asphalt plants were mostly concentrated in the southern Klang Valley corridor, it should enable greater economies of scale, leading to cost efficiencies.

Quarry division earnings forecast maintained, pending further details from management.

RHB said this acquisition marks Sunway’s second quarry acquisition thus far this year.

Recall, in early April this year, Sunway just announced its acquisition of Blacktop Industries for RM70mil.

“The acquisition price of RM125mil represents a RM2mil premium to the valuation carried out by Tropicorp Management Services, a registered professional geologist appointed by Dolomite,” it said.

Based on Dolomite’s FY18 annual report, its quarry business (under the manufacturing division) was making losses at the operating level (MYR5.9m for 18-month period).

The net book value (NBV) for the land and plant & machinery stood at RM4.1mil and RM2.2mil, respectively.

“We maintain our earnings forecasts for now, pending further details to be shared by management.

“Nevertheless, as Sunway aggressively strengthens its market position in the quarry business, we think it will have a competitive advantage in terms of cost efficiencies, compared to other smaller players, given the concentrated presence for its quarries and asphalt plants,” RHB said.

It has maintained its buy call on Sunway with a target price of RM1.85.