Hot Stock Southern Acids seen as undervalued, rises 9.3%

by **Cals** Fri 25 Apr 2014, 02:04

Hot Stock Southern Acids seen as undervalued, rises 9.3%

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Thursday, 24 April 2014 10:35

KUALA LUMPUR (Apr 24): Southern Acids (M) Bhd rose as much as 9.3% after PublicInvest Research said that the stock is undervalued and had raised its target price for the stock to RM9.20 from RM7.77

At 10.35am, Southern Acids was traded at RM4.57, up 39 sen or 9.3% with some 374,100 shares done, and was also the top gainer on Bursa Malaysia Securities.

PublicInvest Research had raised its target price for the stock, after revaluing the 260.82ha (644.49 acres) land in Kota Kemuning, Shah Alam, owned by the company.

The research house said in a note today that the land is now worth at least RM758 million, which exceeds its current market capitalization of RM572 million, based on valuation of RM27 psf as compared to its previous valuation of RM20.

“Our new valuation is based on the latest transacted price by Eco World Development Bhd which had recently purchased 124.94ha (308.72 acres) of land in the vicinity for RM470.6m or RM35 psf.

“Given its strategic accessibility and freehold land status, we find that Southern Acids should deserve a higher value,” said the research house.

It said the tract was easily accessible via the Shah Alam-Kota Kemuning Highway and the North South Expressway, and is situated near to the RM11 billion IJM Land Bhd’s Bandar Rimbayu project which was launched in 2012.

The company currently has no plans for the land in the next one to two years, which PublicInvest Research estimated could reach up to about RM10 billion in GDV if it were to do so.

Southern Acids’ main business includes the manufacturing and marketing of oleochemical products which includes palm-based fatty acids and glycerine products.

The company has also diversified into oil palm plantations, healthcare and dry bulk loading and export loading services.

It has reported steady earnings growth over the last three years, and has a strong balance sheet and operating cash flow.

PublicInvest Research does not have a recommendation on this stock.