Play of the Week: KINSTEEL
Kinsteel has submitted to the SC, the listing proposal of its 51% owned subsidiary, Perwaja Steel SB (PSSB) on the Main Board of Bursa Malaysia.
The flotation would see the incorporation of Perwaja Holdings as the holding company of PSSB via a share swap with 500m shares issue to Kinsteel (51%) and Maju Holdings Bhd (49%) respectively. This would be followed by the public issue of 60m new Perwaja shares and an offer for sale of 90m shares in Perwaja by Equal Concept Bhd (subsidiary of Maju) and Kinsteel at IPO price to be determined later.
Another part of the proposal includes the allocation of 101.5m Perwaja Shares (representing 18.1% of the enlarged paid-up capital of Perwaja) by way of a renounceable restricted offer to the minority shareholders of Kinsteel on the basis of 1-for-4.
Based on OSK Research estimates, Perwaja may contribute between RM150m to RM160m net profit before minority interest to the group.
Assuming 8x PER on FY07 earnings (industry average for FY08 is 6.6x):
Kinsteel has submitted to the SC, the listing proposal of its 51% owned subsidiary, Perwaja Steel SB (PSSB) on the Main Board of Bursa Malaysia.
The flotation would see the incorporation of Perwaja Holdings as the holding company of PSSB via a share swap with 500m shares issue to Kinsteel (51%) and Maju Holdings Bhd (49%) respectively. This would be followed by the public issue of 60m new Perwaja shares and an offer for sale of 90m shares in Perwaja by Equal Concept Bhd (subsidiary of Maju) and Kinsteel at IPO price to be determined later.
Another part of the proposal includes the allocation of 101.5m Perwaja Shares (representing 18.1% of the enlarged paid-up capital of Perwaja) by way of a renounceable restricted offer to the minority shareholders of Kinsteel on the basis of 1-for-4.
Based on OSK Research estimates, Perwaja may contribute between RM150m to RM160m net profit before minority interest to the group.
Assuming 8x PER on FY07 earnings (industry average for FY08 is 6.6x):
560,000,000 listed shares (500mil issued to Kinsteel and Maju Holdings, and public issue of 60m new Perwaja shares)
IPO price = (150mil x 8)/560mil shares = RM2.14
Net proceeds from proposed IPO deal will see Kinsteel ramping up downstream production; and Perwaja earning contribution will also see Kinsteel lowering its gearing ratio.
We can certainly expect a high level of interest in Kinsteel from investors and media in the coming weeks.
Background reading: The Star's Kinsteel article
Background reading: The Star's Kinsteel article
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