PETALING JAYA: Chin Hin Group Bhd is expected to raise RM103.3mil in gross proceeds and netting a disposal gain of an estimated RM35.7mil from its proposed disposal of its entire stake in Solarvest Holdings Bhd, says Public Investment Bank Research.

       The research house, however, is slightly negative on the deal considering the relatively low price transacted given the potential of the renewable energy space, but also noted that the current earnings of Solarvest has been tepid.

       The transaction will see the construction and property-based group disposing of its 19.34% stake in Solarvest for RM103.28mil in cash or 80 sen per share.

       PublicInvest Research said the transacted price represents a slight 2.7% premium to the five-day volume-weighted average price, though at discounts ranging between 4.7% and 12.2% on a one-month and six-month basis. It expects an estimated disposal gain of RM35.7mil, which is in addition to RM18.7mil gained from the earlier disposal of 25.95 million shares between March 3 and April 18 announced previously.

       While the transacted value of 80 sen per share appears low considering the potential of the renewable energy space, the research house said: “It does represent about 30 times earnings multiple to the group’s trailing financial year 2021 (FY21) net profit of RM16.4mil. It would therefore appear opportune for Chin Hin to monetise its investments in Solarvest.”

       The group currently has a 59.4% equity stake in Chin Hin Group Property Bhd, a 32.5% equity stake in Signature International Bhd and a 24.7% stake in Ajiya Bhd, which appear to be more synergistic, added PublicInvest Research.

       “Our FY22 estimates on the group are raised by 49% despite the loss in Solarvest’s earnings as we account for the disposal gains from the cumulative sales of Solarvest shares.

       “We trim FY23 and FY24 by 8.3% on average as we omit forward contributions from Solarvest. Our sum-of-parts derived target price is trimmed to RM2.89 from RM3.01 previously owing to the loss of Solarvest’s value, though net debt is also lowered,” said the research house.

       While maintaining a “neutral” call on Chin Hin, PublicInvest Research continues to see potential in the value of the group’s other listed investments, Signature International and Chin Hin Group Property as well as its overall prospects over the medium to longer term on the expected rollout of construction and infrastructure-related projects.