Atlan Holdings Bhd
Atlan, the country’s largest duty-free retailer, operates 36 outlets in Malaysia under the ‘ZON’ brand. It is also involved in the automotive parts manufacturing and property and hospitality industries.

The company has rewarded shareholders well with high dividends, but it is unclear if the policy is sustainable. Dividends for FY Feb 2010–2013 ranged from 15–19.5 sen per share. In FY14, dividends surged to 65 sen, which translates to an above-average yield of 13.1%.

It should be noted that the large payouts coincided with asset sales in FY14 which resulted in a large net gain of RM134.6 million from discontinued operations. This relates to the “ZON” complex and several parcels of land in Johor, which was sold for RM325 million and subsequently leased back by Atlan for 25 years.

For FY15, Atlan has so far declared interim dividend totalling 25 sen — more than the EPS of 8.34 sen earned in 1HFY15. If a similar performance is maintained, annual EPS could come in at 16-17 sen. And if this performance is maintained going forward with up to 100% maximum payout, future dividends could revert to up to 15 sen per year, with a yield of about 3%.  

Although Atlan’s turnover has been steadily increasing, net profit has fallen from RM115.4 million in FY12 to RM76 million in FY13 and RM71.8 million in FY14 (excluding exceptional gains). For 1HFY15, net profit from continuing operations declined from RM38.5 million to RM21.2 million. As at 31 Aug 2014, net debt stood at RM51.4 million with a low 10% net gearing ratio.

Investors should note that Atlan’s stock is illiquid due to its low public shareholding spread of 14.3%. It has proposed a private placement of up to 38.05 million new shares, or 15% of its share base, by 31 December 2014.

This article first appeared in The Edge Financial Daily, on November 21, 2014.