Pelikan rises on Herlitz support
Reformed German unit seen driving stationery maker’s earnings
PETALING JAYA: Pelikan International Corp Bhd’s earnings growth will be underpinned by the reformed Herlitz AG, which will hold key European and Latin American sales units once its corporate exercise is concluded.
Pelikan has proposed to inject its core stationery sales and distribution assets into its 70.9%-owned subsidiary Herlitz, which will see it raise RM462mil through offer for sale and private placement of new shares by Herlitz.
This will reduce its effective stake in Frankfurt-listed Herlitz to 65.4%.
Kenanga Research analyst Soong Wei Siang said this asset injection, expected to be completed by Dec 31, 2014, would unlock the value of Pelikan’s assets while strengthening its balance sheet.
“Meanwhile, the group is also aiming to dispose of or downsize its printer consumable business in the near term with plants in Switzerland, China and Scotland being lined up for disposal or closure,” he said in a report yesterday.
He said the group was projected to achieve net profit of RM30.5mil in financial year 2014 (FY14), RM68.4mil and RM79.2mil in FY15 and FY16 respectively.
“This translates into growth of 124.5% and 15.8% respectively,” he said.
Out of the RM462mil in proceeds from the corporate exercise, Soong said Pelikan would save around RM6mil in finance costs in FY15 with its decision to earmark RM150mil for repayment of bank borrowings.
He said RM182mil or 39.4% was planned for new product innovation and development of new sales and distribution channels to penetrate new markets.
“The amount also includes advertising and promotion expenses to enhance the branding of both Pelikan and Herlitz,” he noted, adding that the remaining RM115mil of proceeds would be utilised as extra working capital.
Soong said Pelikan’s extensive business rationalisation was bearing fruit, with its net losses narrowing to RM5.5mil in FY13 from RM88.4mil in FY11 after it acquired Herlitz.
Most recently, he said the group recorded profit after tax and minority interest of RM17.2mil in the second quarter of 2014 and RM6mil as of the first half of 2014.
He rated Pelikan as a “trading buy” with a fair value of RM1.55, based on a targeted 12.6 times FY15 price to earnings ratio.