NSL Ltd (NSL SP, TRADING BUY)
Potential Large Dividend Payout From Sale Of Dry Mix Business
NSL Ltd (NSL SP), the former Natsteel Ltd, has been divesting its myriad assets for quite a number of years. Once a conglomerate with interests in steel, electronics contract manufacturing, chemicals and construction products, the Group has been streamlining its businesses through asset sales. Since 2002, the group has distributed more than SGD1.7bn in cash dividends from divestment proceeds.
Divestment activities have picked up pace in the past few years. In 2013, the group divested a 23% stake in Bangkok Synthetics Limited to Siam Cement for SGD328m, generating a gain of SGD120m. Its lime business was sold last year for SGD46.3m, resulting in a gain of SGD26.8m. The latest proposed sale of its dry-mix business to French-based Saint-Gobain Produits pour la Construction S.A.S, when completed, will generate another bumper gain of SGD108m for the Group, with gross cash proceeds of some SGD160m.
NSL, already cash-rich, will see its cash pile increasing to SGD439m or SGD1.17 per NSL share on closure of the sale of its dry-mix business in January 2017. NTA per share will also be boosted by 20% to SGD1.80. Following the sale, NSL will be left with three businesses in the industrial space supplying products from precast concrete, specialty and environmental chemicals and engineering products and services.
We think NSL is on the liquidation path and that its remaining businesses will minimally fetch book value when eventually divested given its track record of recording significant gains on divestments. At current price of SGD1.54, the stock offers a potential upside of 17% to its revised NTA of SGD1.80/share. The near term catalyst will be a large dividend payout from its resultant cash pile of SGD1.17/share. Ong Beng Seng, a major shareholder of NSL, through his shareholding in 98 Holdings, will also find any dividend payout come in handy to fund his latest purchase of HPL shares costing some SGD354m. We recommend a trading buy on NSL.
