Analysts ‘neutral’ on Bonia despite CRG listing on LEAP market
KUALA LUMPUR: Bonia Corporation Bhd (Bonia) has proposed a demerger and subsequent listing of its wholly-owned subsidiary, CRG Incorporated Sdn Bhd (CRG), on the LEAP Market of Bursa Securities, but analysts retained its ‘neutral’ view of the corporate exercise over the longer term.
Of note, CRG is principally an investment holding company with subsidiaries involved in the design, manufacturing, marketing, and retailing of Carlo Rino branded women footwear, handbags, and accessories.
Bonia had announced its plans for the demerger and the separate listing of CRG last month.
According to AmInvestment Bank Bhd (AmInvestment), the board of Bonia approved the proposed distribution of Bonia’s entire shareholding in CRG by way of dividend-in-specie on a pro-rata distribution to the entitled shareholders.
Effectively, it noted that existing Bonia shareholders would own a similar stake in CRG in the LEAP Market, as they do in Bonia on the entitlement date. The entitlement date has yet to be determined.
While the value of CRG shares has yet to be determined, the research team noted that the upper limit on the dividend-in-specie is capped at RM48 million.
“We estimate, should the dividend-in-specie command anything less than RM40.6 million, it would immediately be value destructive to existing shareholders,” it said.
It also noted that Bonia expects to complete the corporate exercise in the 3Q of 2018.
“We would also like to highlight that current shareholders find it attractive to sell their existing Bonia stakes to avoid obtaining potentially less liquid CRG shares in the LEAP Market.
“It could translate into share weakness leading up to the entitlement date.
“However, we reiterate the neutralilty of the corporate exercise over the longer term. Greater visibility and coherence of Bonia earnings drivers from the distinct Carlo Rino brand could offset the potential near-term restructuring value destruction,” it opined.
Ovearll, while AmInvestment is ‘neutral’ on the corporate exercise, it maintained its ‘buy’ recommendation on the stock.
“We continue to like Bonia’s flagship brands, Braun Buffel and Bonia, and its turnaroundled growth off a low base. Meanwhile, valuations are attractive for a regional luxury brand going through an upcycle in consumer spending,” it explained.