's (KLK) RM1.58bil cash offer to acquire IJM Corp's stake in IJM Plantation, which it believes to be a fair price.The research house said the offer of RM3.20 per share is 39% higher than its RM2.30 ascribed value for IJM Plantation.
It said against IJM Plantation's RM1.63 book value per share, IJM would recognise a potential gain of about RM727mil or 20 sen per share.
"We believe these fresh proceeds could be channelled to spearhead PFI (private finance initiative) related projects and shore up IJM’s current outstanding orderbook of RM4b given the government’s weaker fiscal position post Covid-19 pandemic.
"Note that current orderbook has shrunk from its peak orderbook of RM8.8b registered in FY19," added Kenanga.
The research house said IJM's net gearing was comfortable at 0.45x but could further decline to 0.23x following the deal.
It added that that there is room for special dividends to be made as IJM has historically paid out special dividends after recording gains from their asset disposals.
Assuming a 20 sen special dividend being paid, IJM's net gearing would still remain comfortable at 0.31x.
"Keep Outperform with higher SoP-TP of RM2.35 (from RM2.20) after factoring for the higher-than-expected value derived from IJMPLNT," said Kenanga.