KUALA LUMPUR (April 1): Hong Leong IB Research has maintained its “Hold” rating on Karex Bhd with a revised target price of RM4.61 after Karex announced that it had entered into an agreement to acquire two pieces of lands measuring approximately 4.5 hectares Pontian for RM14.8 million cash.
In a note today, the research house said the objective of the land purchase was to ensure that the daily operation would face no disruption as Karex embark on its expansion plan.
“We are positive on the land acquisition as it gives Karex a better position as a land owner rather than tenant, thereby reducing the risk of non-renewal of the tenancy agreement which will expire in October 2015.
“We raised our target price to RM4.61 as we lift our target P/E from 21x to 23.8x CY16 EPS (2SD above its international peers) in view of positive earnings expectation and expansion plan. We maintain Hold recommendation on the equity,” it said.