Kim Loong’s three-for-one share split garners positive views

KUALA LUMPUR: Kim Loong Resources Bhd’s (Kim Loong) proposed three-for-one share split has garnered positive views from analysts, given that it will improve shares liquidity of the stock.

According to JF Apex Securities Bhd (JF Apex Securities), the enlarged share based after this exercise will be 935.41 million, from 311.8m previously.

“Meanwhile, theoretical adjusted market price will be RM1.37 (based on current share price of RM4.11),” JF Apex Securities said.

“We are positive with the corporate exercise as it will improve shares liquidity of the stock (higher number of shares coupled with lower entry price), as welcomed by investors.”

“Thereafter, proposed free warrants on the basis of one warrant for every 20 subdivided shares with exercise price to be determined later.

“We understand that the bonus of free warrants will have tenure of seven years and may be exercised at any time during the tenure.

“The enlarged share based will further increase to 980.284 million after taking into account for both the share split and free warrants.”

The research firm expected Kim Loong declare another nine sen per share in the fourth quarter of financial year 2018 (4QFY18) which brought the group’s total dividend to 27sen per share for FY18, translating into an attractive dividend yield of 6.5 per cent based on current share price.

On the outlook, JF Apex Securities revised upwards its earnings forecasts for FY18F and FY19F by three to eight per cent after adjusting for higher fresh fruit bunch (FFB) production growth and FFB intake.

The research firm in turn, upgraded Kim Loong to a ‘buy’ from ‘hold’, with an unchanged target price of RM 4.59 per share.

JF Apex Securities opined that value re-emerges following the recent retreat in share price coupled with positive news on share split and free warrants exercise and declaration of special dividend.

The research firm foresaw share price to be less volatile after the corporate exercise in view of better share liquidity.

“Overall, we favour Kim Loong given its prudent management, judging from the consistent earnings performance posted by the group for the past few years as well as its generosity of management in rewarding shareholders.

“Looking forward, we opine that the catalyst for the stock would be the setup of new milling plant in Sarawak and expansion of its plantable land,” the research firm said.