OSK Research has maintained its trading buy call on Lion Industries Corp at RM1.96 and raised its target price for the stock to RM2.32 (from RM2.18) after the company's 73%-owned subsidiary Lion Forest Industries (LFI) announced that its 84.2%-owned Silverstone Corporation (SCB) has disposed of 100% equity interest in Silverstone Bhd for a cash consideration of RM462 million to Toyo Tire & Rubber Co Ltd.
The research house said the net disposal gain of RM140 million to LFI, and the RM102 million that would accrue to Lion Industries' P&L, should be classified as exceptional.
"Although a potential earnings dilution prompts us to slash our estimates by 6.4% for FY6/11 and 12.4% for FY6/12, we are hopeful of the negative implications being compensated by a potential special cash payout of as much as RM233.6 million to Lion Industries, and taking into account the 14 sen enhancement to the company's NTA.
"We are also tweaking our PER multiple to 6 times from 5 times but retain our NTA/share parameter at 0.6 times, after which our 12-month target price is revised upwards to RM2.32. Trading Buy," it said in a note on Friday, Oct 22.
The research house said the net disposal gain of RM140 million to LFI, and the RM102 million that would accrue to Lion Industries' P&L, should be classified as exceptional.
"Although a potential earnings dilution prompts us to slash our estimates by 6.4% for FY6/11 and 12.4% for FY6/12, we are hopeful of the negative implications being compensated by a potential special cash payout of as much as RM233.6 million to Lion Industries, and taking into account the 14 sen enhancement to the company's NTA.
"We are also tweaking our PER multiple to 6 times from 5 times but retain our NTA/share parameter at 0.6 times, after which our 12-month target price is revised upwards to RM2.32. Trading Buy," it said in a note on Friday, Oct 22.
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