Boustead to take Boustead Heavy Industriest private?

Reason for move may be BHIC’s current cheap valuations
PETALING JAYA: Boustead Holdings Bhd is considering taking its unit Boustead Heavy Industries Corp Bhd (BHIC)
private, driven largely by the latter's seemingly cheap valuations
especially in light of the recent RM9bil vessel contract it has been
awarded, reliable sources said.
“This possibility isn't new though. The market has been talking about this even before.
“However,
earnings from this RM9bil project from the Defence Ministry could come
earlier than expected,” said the source, adding that this made BHIC an
even more compelling privatisation target now.
At press time, Boustead had yet to reply to StarBiz queries on this.
Last week, BHIC's associate Boustead Naval Shipyard Sdn Bhd
was awarded a RM9bil contract from the Defence Ministry to design,
build and deliver six second-generation patrol vessels or Littoral
combat ships (frigate class).
The contract would be implemented
over three Malaysia plans the 10MP, 11MP and 12MP with the delivery of
the first ship expected in 2017 and with follow-on ships every six
months thereafter, according to a BHIC announcement.
“With the massive contract, it has erased concerns on BHIC earnings visibility,” said Hwang DBS, which has a “buy” call on the firm.
“BHIC
is a clear bargain, trading at only 9.5 times its financial year 2012
earnings per share despite its enviable monopolistic position in naval
vessel construction and maintenance works for the Royal Malaysian Navy,”
it said.
Hwang DBS has yet to change its earnings forecast for
BHIC pending details on the contract's implementation schedule but said
the stock should be re-rated following this piece of news.
It is expecting BHIC to make a net profit of RM82mil or 33.2 sen per share for its financial year ending Dec 31, 2012.
According
to BHIC's 2010 annual report, Boustead holds 65% in BHIC; which means
Boustead has to fork out some RM277mil for the remaining shares that it
does not own in the company at current prices or more if it is to pay a
premium to market.
BHIC had a net loss of RM2.4mil for its third
quarter ended Sept 30 against a net profit of RM26.9mil for the same
period a year ago due to higher operating and finance costs as well as
lower share of profits from its associates.
The stock closed 2
sen up to RM3.18 while its parent Boustead finished 5 sen higher to
RM5.54 in a lower broader market yesterday.
BHIC. which was formerly known as PSC Industries Bhd,
is involved in maritime, engineering, and defence-related services, as
well as providing fabrication services for the oil and gas sector.
It has three local shipyards and one more in Ghana.
BHIC's other major shareholder is Lembaga Tabung Angkatan Tentera which holds an 8.15% stake in the company.