KUALA LUMPUR (June 19): Boustead Plantations Bhd (BPlant) shot up as much as 12 sen or 13.48% to an all-time high of RM1.01 in Monday (June 19) morning trading, after The Edge Malaysia weekly, citing sources, reported that Boustead Holdings Bhd is planning to divest its 57% stake in the plantations group.

Year-to-date, it has risen 70.18% or 41.65 sen from 59.35 sen.

Meanwhile, 49.31 million shares traded hands, making BPlant the sixth-most traded counter on Monday. The volume of traded shares was almost 25 times its 200-day average of 2.21 million.

Boustead, which is in the midst of being privatised by Lembaga Tabung Angkatan Tentera (LTAT), is understood to have invited proposals on the sale of its stake in BPlant two weeks ago.

According to the weekly magazine, bidders include YTL Group, Wilmar International Ltd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd.

In a note on Monday, PublicInvest Bank said it estimated that BPlant could have an enterprise value (EV) of RM2.5 billion to RM3 billion, thanks to its vast tracts of lands in Malaysia, which include strategically-located parcels that are suitable for property development.

"We have identified several places [for property development, namely Balau (Selangor), Kuala Muda, Kedah Oil Palms and Ladang Bukit Mertajam (Kedah). In addition, such vast plantation landbank size in Malaysia makes it an attractive appetite for the big-cap plantation companies," it said.

The research house said given its landbank, BPlant's EV, which works out to RM37,219 per hectare of planted area based on its market capitalisation of RM2 billion as at the end of Friday (June 16)'s trading session, which implies a trailing core price-earnings ratio (PER) multiple of 13.3 times, is attractive.

"In the event the entire 57% stake held under Boustead Holdings is transacted, it will likely trigger a general offer for other shareholders," PublicInvest Bank said, while maintaining a "neutral" rating on the plantations sector.

Meanwhile, Maybank Investment Bank's Ong Chee Ting said about 60% of BPlant's business units — which works out to 38,640 hectares of its 97,399 hectares of landbank — are Roundtable on Sustainable Palm Oil-certified, as at 2022.

"At current share price (89 sen), it trades at an EV/hectare of RM35,690 (peers avg: circa RM59,000/hectare), but in part due to its low fresh fruit bunch yield of 13 tonnes/hectare in 2022 (national avg: 15.5 tonnes/hectare). In terms of PER, it trades at 38 times FY2023 estimates. 

"We believe the deal, if it materialises, may still be subject to regulatory/government approvals, as BPlant is a government-linked corp (GLC). And recall that in April 2020, an unrelated government-linked company, MSM Malaysia Holdings Bhd, rescinded its sale and purchase agreement with F&N Holdings Bhd, after its proposal to dispose 4,454 ha (hectares) of leasehold agricultural land in Perlis, Kedah (in October 2019) did not receive the Economic Planning Unit's approval.

"We continue to rate BPlant a 'hold' with a higher revised net asset value (RNAV)-derived target price of 92 sen, as we reduce our RNAV-discount to 35% (from 72 sen on 45%-discount) on news report that Boustead is looking to dispose of BPlant, which in turn may trigger a general offer (GO) upon deal completion. We advise minority shareholders to hold out for a potential GO. We opine [that] BPlant’s upside potential is likely capped by its net tangible asset per share of RM1.30. But failure to seal a deal may cause BPlant's share price to give back recent gains," wrote Ong.