KUALA LUMPUR (June 10): IJM Corp Bhd is expected to pay shareholders a special dividend from proceeds of the group’s planned sale of its 56.2% stake in IJM Plantations Bhd to Kuala Lumpur Kepong Bhd (KLK) for RM1.53 billion or RM3.10 per share, according to analysts including those from Maybank Investment Bank Bhd and Hong Leong Investment Bank Bhd.
Hong Leong analyst Jeremy Goh wrote in a note today that the research firm reckons the proposed transaction could result in a special dividend of 21 sen a share from IJM Corp on top of its 3.8 sen dividend for the financial year ending March 31, 2022 (FY22).
According to Goh, the expected cumulative dividends from IJM Corp translate into a yield of 13.1%.
“Note that we are assuming a 50% payout ratio on the sale proceeds. Nonetheless, it is possible for IJM Corp to pay out the proceeds over 2-3 years, in our view.
“With this transaction, we estimate IJM Corp would record a RM728m one-off gain on disposal while net gearing could reduce from 0.43x to 0.39x by our estimates.
“The deconsolidation of IJM Plantations would reduce IJM Corp’s FY22-23f earnings by -17/-10% (assuming 50% of cash proceeds are reinvested at c.4%). However, we note that this is mainly driven by higher assumptions of CPO (crude palm oil) prices of late. We note that in the past, IJM Plantations has been a volatile drag on IJM Corp’s core earnings.
“This is an opportunistic sale on the part of management leveraging on favourable CPO prices. Going forward post-sale, IJM Corp’s earnings profile would be more stable with the exclusion of its plantation business,” he said.
More to follow
