Neutral on Bonia’s proposed demerger

KUALA LUMPUR: Bonia Corporation Bhd’s (Bonia) proposed de merger and subsequent listing of wholly-owned subsidiary CRG Incorporated Sdn Bhd (CRG) on the LEAP Market of Bursa Malaysia Securities Bhd has garnered neutral views from analysts.

According to AmInvestment Bank Bhd (AmInvestment Bank), the intended objective is likely to position Bonia with greater visibility and coherence of earnings drivers.

AmInvestment Bank anticipated that CRG may command lower valuations than Bonia seeing the LEAP Market is less liquid and has a lower pool of investable institutional investors, which effectively translate into demand.

“Should CRG command lower valuations than Bonia, it could be value destructive to existing Bonia shareholders in the near term,” the research firm said.

“We are neutral over the development. While we appreciate greater visibility and coherence of Bonia earnings drivers excluding CRG over the longer term, it may be offset by the potential near-term restructuring drag.”

All in, AmInvestment Bank maintained its ‘buy’ recommendation and fair value of RM0.67 per share.

The research firm noted that valuations are pegged to financial year 2019 (FY19) with a target price earnings (P/E) of 14.5-fold, in line with Bonia’s five-year historical average P/E.

“We continue to like Bonia’s flagship brands, Braun Buffel and Bonia and its turnaroundled growth,” the research firm said.

“Meanwhile, valuations are attractive for a regional luxury brand going through an upcycle in consumer spending.”