Kenanga keeps forecasts on QL Resources


KUALA LUMPUR: Kenanga Research is neutral over QL Resources Bhd's acquisition of an additional stake in Boilermech Holdings Bhd given its minimal financial impact.

"We are neutral over this acquisition as our preliminary estimates suggest that the additional 4% stake in Boilermech would pose negligible impact to earnings.

"Furthermore, assuming the proposed acquisition of RM19.6m is fully debt funded given that QL has yet to disclose its planned proportion of borrowings against internal funds for this acquisition, the group would still remain in a comfortable net gearing of 0.25x (versus pre-acquisition’s 0.24x)," it said.

QL Resources has entered into an unconditional share agreement to acquire 20.6 million shares or 4% stake in Boilermech for RM19.6mil cash or 95 sen a share.

Upon successful completion, this would bring QL's total equity stake in the company to 48.15% and trigger a conditional mandatory take-over, subject to the 50% acceptance and approvals of any relevant parties.

QL intends to maintain the listing status of Boilermech and does not intend to acquire any remaining offer shares from the holders who have not accepted the offer.

The offer price of 95 sen a share is at a 3.4% premium to Boilermech's five-day VWAP up to and including Dec 2, 2020.

This implies about 21x price-earnings ratio (PER) to Boilermech's FY20 net profit of RM23.30, which is at a premium over the five-year historical average PER of 16x, said Kenanga.

The research house maintained "market perform" on the stock with an unchanged target price of RM6.60, in line with no changes to its earnings forecasts.
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3
   

Did you find this article insightful?

Yes
No

100% readers found this article insightful

Next In Business News

Biden's return to Paris pact just a first step for US climate action
UK will submit request to join CPTPP trading bloc soon
Oil price rises on US stimulus hopes, tighter market under Biden
Netflix Stock Soars to All-Time High on Q4 Subscriber Beat, Cash Flow Guidance
Wall Street closes at record highs as earnings jump, Biden inaugurated
Keeping the rate cut option
Malaysia Aviation Group moves forward in its revamp exercise
Double-digit earnings growth for most sectors
MAHB earmarks RM400mil for capex
MDEC appoints Nora Junita as chief financial officer

Stories You'll Enjoy