THE proposed acquisition of Ramunia Holdings Bhd by conglomerate Sime Darby Bhd through wholly-owned Sime Darby Engineering Sdn Bhd (SDE) is likely have a positive impact on its earnings, analysts said.

However, there will be some lower margins to SDE in the near term as it cleans up Ramunia's operations, said ECM Libra Investment Research in a research note today.

Ramunia currently has a heavy gross gearing of RM360.6 million, gross cash of RM38.8 million and is likely to run out of cash in one-and-half year.

At lunch break today, Sime Darby's share price dropped 10 sen to RM6.60 while Ramunia was suspended yesterday with its last traded price at 63 sen.

The Ramunia shares are suspended until May 7.

Sime Darby, through SDE, announced yesterday that it has offered to buy Ramunia for a total provisional purchase consideration of RM232 million.

The purchase consideration will be satisfied by RM46.2 million cash and RM185.8 million equivalent value of new ordinary shares, representing 20 per cent of the ordinary share of the enlarged SDE.

ECM Libra said the deal seemed like a good one for Sime Darby, especially if compared to the RM3.2 billion reversed takeover (RTO) deal with Malaysia Marine and Heavy Engineering Sdn Bhd that was scrapped last year.

"We might see in the near term some lower margins to SDE as they clean up Ramunia's operations but this we see would only have minimal impact to Sime Darby as a group," it said.

SDE is effectively paying RM1.4 million per acre for Ramunia's 170-acre yard space which is strategically located next to SDE's yard.

"The deal will balloon SDE's yard space to 298 acres from 128 acres, enough to execute multiple major fabrication job simultaneously," ECM Libra said.

On the earnings impact, Kenanga Research said it is expected to be neutral for near term but positive in the medium term where SDE would have ample room to expand its order book as Ramunia's yard space is still under underutilised.

"We understand that SDE has an outstanding order book of RM2 billion with its yard already fully utilised," the research house said, adding that there could potentially be a RTO from SDE to assume Ramunia's listing status.

"A RTO would save SDE from the initial public offering procedures and allow Sime Darby to unlock its investments in SDE," said Kenanga Research.

OSK Research said Ramunia's assets represented a strategic fit for SDE, saying that it will be positive for Sime Darby if the offer is accepted.

"However, given the relatively low price coupled with partial satisfaction by shares in unlisted SDE rather than Sime Darby, we believe Ramunia may not accept the offer if it has a choice," it said in a research note today.

Sime Darby Bhd's managing director, Datuk Mohd Shukri Baharom, meanwhile said the RM232 million acquisition of Ramunia Holdings Bhd group will give SDE the muscle it needs to expand further especially in bidding for international contracts.

SDE, an indirect wholly-owned unit of Sime Darby Bhd, currently faces capacity constraints.

He said that SDE lost out the opportunity to bid for contracts worth RM20 billion over the last three years due to a lack of yard capacity.

The proposed acquisition will increase its yard capacity to 284 acres from 114 acres currently, he told a press conference here.

It will also make SDE the largest fabricator in Malaysia with the capacity rising to 52,700 metric tonnes from 107,00 metric tonnes.

SDE's order book is currently at RM1.1 billion which will last till the end of 2010. -- BERNAMA