Benalec  announced that  its  70%-owned subsidiary  Spektrum  Kukuh  Sdn Bhd  has  terminated  the  binding  term  sheet  with  Johor  state  government and 1MY Strategic Oil Terminal Sdn Bhd (1MYSOT) on the expiry date of 11  June  2015.  The  term  sheet  allows  1MYSOT  the  exclusive  right  to negotiate  for  the  acquisition  of  1,000  acres  of  land  to  be  reclaimed  by Benalec  off  the  coast  of  Tanjung  Piai,  Johor.  1MYSOT  planned  to construct  and  operate  a crude  oil  and petroleum  storage facility  together with a private jetty (COPSF) on the reclaimed land. (Source: Bursa Malaysia).

Comments:  After  negotiating  for  over  2  years  with  1MYSOT,  it  is disappointing  that  the  deal  has  fallen  through.  This  could  dampen sentiment  on  the  stock  in  the  short  term  but  we  believe  that  market expectations are low that the deal will be concluded given the many time extensions  earlier.  The  termination  of  the  deal  will  allow  Benalec  to negotiate  with  other  parties  to  form  partnerships  for  the  proposed reclamation  project.  We  understand  that  5-6 parties  are  interested in the COPSF project. But until a firm deal is close at hand, we do not see a rerating  catalyst  for  the  stock  in  the  medium  term.  We  reiterate  our  HOLD call on Benalec with RM0.73 target price.

Source: Affin Hwang Capital Research - 12 Jun 2015