SCGM slips in morning trade on proposal to dump core business
As of 9:32 a.m., the stock was down eight sen or 3.36% at RM2.30 on the back of almost five million shares traded.
Trading in the plastic packaging maker’s shares was suspended on May 9 in light of the important announcement.
In a filing with Bursa Malaysia, the group said it had entered into a contingent share sale agreement with Mitsui & Co Ltd and FP Corp for the proposed sale of 100% stake in Lee Soon Seng Plastic Industries (LSSPI ).
Of the stake, 60% will go to Muitsui while 40% will be purchased by FPCO.
SCGM expects the exercise to be completed by 3Q22 pending approvals of at least 75% of the total number of issued shares held by SCGM shareholders at an extraordinary general meeting.
On the divestiture, SCGM proposed to distribute RM69.3 million or 36 sen per share to shareholders via a capital reduction and redemption exercise and an indicative dividend of RM356.2 million or RM1.86 per share. stock.
SCGM has also entered into a conditional sale and purchase agreement to transfer three plots of land along with a factory building and other ancillary buildings in Johor for a total cash consideration of RM18.8 million.
In its company update, Kenanga Research said the disposal consideration translates to RM2.83 per share, which is above its previous target price of RM2.34.
“The premium valuation – which implies an EV/EBITDA of 10.6x and a PER of 16.0x based on LSSPI’s historical financial data for the April 2021 fiscal year – provides a timely exit opportunity for shareholders. of SCGM.
“As such, we believe the deal will likely obtain the necessary shareholder approvals,” he said.
The research firm, which stands by its guidance pending completion of the deal, said it believes the sale should allow SCGM to unlock its investment in LSSPI and reward existing shareholders.
He maintained his “market performance” recommendation on the stock with a new target price of RM2.53.