CIMB downgrades Benalec on directors' removal

by **Cals** Thu 10 Oct 2013, 17:28

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Thursday, 10 October 2013 15:02

KUALA LUMPUR (Oct 10): CIMB Investment Bank has downgraded its target price for Benalec Holdings Bhd shares to RM1.25 from RM1.68. The research firm has also lowered its recommendation for the stock to "neutral" from "trading buy".

In a note today, CIMB analyst Sharizan Rosely said the downgrade follows the termintion of two executive directors' services in the CONSTRUCTION [] firm.

"The termination of two directors is a negative surprise and investors
could turn cautious about management's credibility.

"Fundamentals are intact but this move takes the attention away from the mega-land reclamation deal in Iskandar, which has yet to kick off," Sharizan said.

Yesterday, the press reported that Benalec had terminated the services of executive directors Datuk Leaw Tua Choon and Datuk Leaw Ah Chye.

The firm said Tua Choon and Ah Chye have breached the terms of their service agreements.

Sharizan said news on the directors' removal triggers a negative perception on Benalec.

"Although we concur with management that fundamentals and the business direction of the company are intact, the nature of the terminations, in our view, could have legal implications.

"This is a disappointment as it is likely to take attention away from the group's mega land reclamation prospects in Iskandar. The expectation that the phase 1 sale and purchase agreement (SPA) will be signed by end-2013 was the reason we remained positive on the stock," Sharizan said.

He said the termination of the directors' services should not further delay the signing of the SPA.

“However, we foresee a short-term overhang on the share price until the situation subsides and until there is meaningful progress in the group’s maiden venture in Iskandar,” he said.