Synergies in CCK’s acquisition of PT Bonanza

PETALING JAYA: CCK Consolidated Holdings Bhd‘s proposed acquisition of a prawn processing enterprise in Indonesia will convey enterprise synergies and contribute to profitability.

Nonetheless, CGS-CIMB Analysis is “impartial” on the deal resulting from issues over the unstable nature of the enterprise and it being a associated social gathering transaction (RPT).

Final week, CCK proposed to purchase PT Bonanza Pratama Abadi, an Indonesian firm concerned in shrimp processing for US$8mil or RM33.8mil.

The acquisition is deemed a associated social gathering transaction as each CCK and PT Bonanza have widespread main shareholders.

“General, we’re ‘impartial’ on the proposed acquisition primarily based on the preliminary announcement particulars.

“On the optimistic facet, we imagine that the acquisition might be earnings accretive whereas we’re conscious of the synergies between PT Bonanza and CCK.

“On the flip facet, we’re involved in regards to the earnings volatility of PT Bonanza’s enterprise and the truth that it’s an RPT,” CGS-CIMB stated in a word to shoppers.

The analysis agency added that it gathered the acquisition was accomplished on a “keen purchaser, keen vendor” foundation.

CCK has operations in Indonesia, which contributed 20% of its monetary 12 months 2021 (FY21) income. It additionally has a prawn phase for the rearing and manufacturing of prawn and seafood merchandise in Malaysia, which made up 3.3% of FY21 income.

Primarily based on the RM33.8mil buy value, this valued PT Bonanza at 8.7 occasions 2020 value to earnings (PE). Compared, regional friends with related enterprise are buying and selling at 7.2 occasions to 11.9 occasions PE.

“CCK goals to fund this acquisition by way of internally generated funds and financial institution borrowings, which shouldn’t be a problem given its present internet gearing of 0.05 occasions as of end-FY21,” stated CGS-CIMB Analysis.

It added that assuming PT Bonanza may obtain related internet revenue because it did in FY20, this might carry CCK’s FY22-FY24 forecast earnings per share (EPS) by 5.6% to 10.2%.

The corporate derived 80% of its gross sales from exports to Japan and made a internet revenue of RM3.9mil in FY20.

“However, we make no modifications to our FY22-24 forecast EPS estimates pending additional operational particulars similar to capability and promoting costs, in addition to CCK acquiring approval from an EGM,” stated the analysis agency.

It saved its “add” name and goal value of 76 sen. Present valuations are enticing at 9.7 occasions 2023 forecast PE, which is a 25.4% low cost to its five-year imply, it added.

Topic to CCK acquiring all related approvals and shareholders’ nod at an EGM, the proposed acquisition is focused to be accomplished within the second half of 2022.


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