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Wednesday, January 22, 2014

Southern Acids valued min RM7.77/share


KUALA LUMPUR: According to PublicInvest, Southern Acids (SAB) market cap of RM420 million has merely factored in its diversified businesses, namely, plantations, oleochemicals, healthcare and warehousing & conveying.

It noted that what investors over-looked is SAB's 644.49 acres of prime landbank worth RM562m in Kota Kemuning, Shah Alam.

At current share price, SAB's investors today thus get its Kota Kemuning landbank and cash for free.

Based on our valuation, we see deep underlying value in the company as it could worth at least RM1 billion or RM7.77 per share.

Healthy balance sheet and consistent earnings. SAB has reported steady earnings growth for the last three years on the back of improved plantation sales contribution while oleochemicals business remain steady.

Besides that, the company's balance sheet and operating cash flows are healthy and solid.

Its net cash position currently stands at RM148 million with zero borrowings while net operating cash flow was about RM30 milion - RM80 million for the last three years.

Though there is no dividend policy and the payout does not seem attractive, the company has consistently maintained its 2 per cent dividend yield for the last five years.

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