KUALA LUMPUR (Sept 30): The proposed divestment of ENRA Kimia Sdn Bhd for RM50 million is fair and reasonable, independent adviser QuantePhi said in a circular to ENRA Group Bhd’s minority shareholders.

“We are of the opinion that, taken as a whole, the proposed divestment is fair and reasonable and is not detrimental to the interest of the non-interested shareholders of ENRA Group.

“Accordingly, we recommend that the non-interested shareholders of ENRA Group vote in favour of the resolution pertaining to the proposed divestment at the forthcoming extraordinary general meeting,” said QuantePhi.

Agrochemical group Hextar Global Bhd and investment holding company Ekopintar Sdn Bhd have offered to acquire the entire issued capital of Enra Kimia, a wholly-owned subsidiary of ENRA Energy Sdn Bhd, which in turn is a unit of ENRA Group. 

ENRA Kimia is one of the largest distributors of specialty chemicals and catalyst for the oil and gas industry in Malaysia.

Hextar Global has proposed to acquire a 49% stake for a cash consideration of RM24.5 million while Ekopintar gas offered to buy the remaining 51% for a cash consideration of RM25.5 million.

ENRA Group president and group CEO Datuk Mazlin Md Junid owns a 50% stake in Ekopintar. As a result, the stake sale is deemed a related-party transaction.

In its independent advice circular issued on Thursday, QuantePhi said the proposed divestment is in line with ENRA Group’s strategy to focus on maximizing returns from its energy and property development businesses.

This will also enable the group to realize an attractive return on investment in ENRA Kimia within a shorter stipulated timeframe and taking into account the limited prospective suitors for ENRA Kimia’s specialized business, especially given the decline in ENRA Kimia’s contribution to the overall profitability of ENRA Group, said QuantePhi.

It added that the exercise will also enable ENRA Group to deploy resources towards its remaining energy and property development businesses.

QuantePhi said that by comparing the sale consideration against the valuations assigned to comparable companies, the sale consideration is fair and reasonable.

It said that based on its analyses, the implied price-earnings (P/E) of 39.65 times is higher than the range of the P/E of the comparable companies

In addition, the enterprise value/earnings before interest, taxes, depreciation and amortisation EV/EBITDA of 8.02 times is within the range of the EV/EBITDA of the comparable companies and higher than their median EV/EBITDA.

Also, the price-to-book (P/B) of 1.68 times is within the range of the P/B of the comparable companies and higher than their median P/B, said QuantePhi.

ENRA Group was trading at 79 sen in afternoon trading, giving the group a market capitalisation of RM107.6 million. The stock has risen 23.44% year-to-date.