There is a "Continuation Wedge (Bearish)" chart pattern formed on King Wan. This bearish signal indicates that the stock price may fall from the close of 0.32 to the range of 0.25 - 0.27. The pattern formed over 21 days which is roughly the period of time in which the target price range may be achieved.
King Wan has received 116.32m KTIS shares worth SGD45.3m (which began trading on the Stock Exchange of Thailand yesterday).
King Wan will recognise a SGD24m profit, and we continue to expect a 1-cent special dividend to be declared for FY14, increasing to 1.5 cents for FY15 and beyond.
Further, there may be long-term capital gain potential from the KTIS shares due to: i) rebounding sugar prices and ii) investment in two new biomass electricity plants with the IPO proceeds which is expected to drive earnings growth.
We estimate King Wan&rsquo s SOP valuation to be SGD0.49 per share. Our SOP methodology is as follows:
i) core mechanical & electrical and rentals businesses at 9x P/E
ii) book value for investments in property development and vessel-owning associates
iii) capital gains on vessel but conservatively zero gains on property developments
iv) KTIS shares at THB10 per share
v) less SGD1m of net debt.
The SOP value for King Wan works out to be SGD0.49 per share. Interestingly, King Wan&rsquo s price of SGD0.335 (recently) implies a core P/E of 0.5x.
Alternatively, the share price implies 7.75x core P/E and zero value for the entire KTIS stake. We maintain BUY with SGD0.43 TP based on a 7% required yield, though a lower required yield is arguable.
KTIS closed at 8.85 baht, down from IPO price of 10.
To some degree, King Wan share prx will be hostage to the KTIS share price movement especially if the swings are too wide.
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