KUALA LUMPUR (Oct 5): Boustead Plantations Bhd’s (BPlant) share price climbed to RM1.41 during the morning trade session on Thursday, after the Armed Forces Fund Board (LTAT) swooped in to privatise its 68.01%-controlled plantation group at RM1.55 per share.
The offer price matches Kuala Lumpur Kepong Bhd’s (KLK) proposed acquisition of a 33% stake and one share in BPlant from LTAT and Boustead Holdings Bhd for a cumulative RM1.15 billion, which definitively fell through on Wednesday.
Under the deal, KLK had planned to extend a mandatory general offer at RM1.55 per share to privatise BPlant, with KLK controlling a 65% stake, and LTAT the other 35%.
Another aspect of the deal concerned some 46% of BPlant’s planted hectarage of 72,291ha, where the trees are past their prime. The replanting cost is expected to cost RM150 million a year, or RM1 billion over six years.
However, with the KLK deal now defunct, LTAT has taken the reins, and is expected to fork out RM1.11 billion to acquire the remaining 31.99% stake or 716.66 million shares in BPlant it does not control.
While KLK announced that the strategic collaboration agreement was mutually terminated as the conditions precedent would not be satisfied by an twice-extended Oct 6 deadline, the deal was a point of contention in Parliament, as a number of opposition leaders claimed it was not in line with the government’s aim of achieving the Bumiputera corporate equity target of 30% by 2025, as outlined in the 12th Malaysia Plan.
Elaborating on LTAT’s viewpoint on the deal, Defence Minister Datuk Seri Mohamad Hassan said that Boustead, which was privatised by LTAT earlier this year, needed RM800 million by year end to meet its debt obligations.
Now, LTAT will need to look at an alternate avenue to raise the required RM800 million, as it is further burdened with the RM1.11 billion buyout of BPlant.
It is also worth noting that earlier this week, Prime Minister Datuk Seri Anwar Ibrahim said the Ministry of Finance had allocated RM300 million to aid LTAT in addressing its liquidity issues, and another RM2 billion by year end to “save” LTAT.
At 12.12am on Thursday, BPlant shares had pared gains to RM1.39, still up 12 sen or 9.45%, enough to slot the counter among Bursa Malaysia’s top gainers for the day thus far. With 65.69 million BPlant shares having changed hands, the stock was also among the local bourse’s top actives.
Trading of BPlant shares was temporarily suspended on Thursday morning until 10am, due to LTAT’s announcement of its intention to proceed with the general offer for the group.
Accept LTAT’s offer, says Kenanga
With the offer price remaining the same at RM1.55, investment analysts still say the deal is valued at a premium in the context of the plantation sector.
Kenanga Research said the offer price is still attractive, as it rates BPlant at 82 times price-earnings ratio for the financial year ending Dec 31, 2024 (FY2024), and at 1.3 times price-to-book value ratio.
“At RM1.55 per share, BPlant is valued at 1.3 times price-to-net tangible assets (which is at a premium to the sector's price-to-book value), or more likely at RM56,000 per planted hectare, which is within the sector valuation, given the size, quality and prospects of BPlant, as about half of its estates are pending replanting,” it said.
Kenanga maintained its recommendation for shareholders to “accept the offer” at RM1.55 a share, as it would allow them to exit at a better valuation than the equity market would have been ready to offer.
“Many smaller plantation groups typically trade at discounts to even their net tangible assets,” it noted.
HLIB mildly positive on KLK not proceeding with 33% stake acquisition
On KLK’s part, the termination of the deal has no material effect on the group, according to analysts.
HLIB Research said it is mildly positive on the development, as the research firm did not expect KLK’s proposed acquisition of the BPlant stake to be earnings-accretive, at least in the near to medium term, in view of BPlant’s low earnings and interest expenses from the proposed acquisition.
“Besides, we note that around 45% of BPlant’s planted area is aged above 20 years (which will be due for replanting in the near to medium term),” it added.
Meanwhile, MIDF Research suggested that with the year-to-date crude palm oil price at RM3,862 per metric ton, coupled with an attractive average sector enterprise value (EV) of RM39,163 per planted hectare, KLK’s merger and acquisition plans are still up in the air.
With the BPlant deal behind, it listed Sarawak Oil Palms Bhd, Ta Ann Holdings Bhd, TSH Resources Bhd and United Malacca Bhd as notable privatisation candidates for KLK moving forward, as they trade below the average sector EV per hectare.
“Affordability is not a big issue, since KLK’s balance sheet remains stable, with cash of RM2.78 billion and net gearing of 40.6%,” it added.
MIDF maintained its “buy” call on KLK, with an unchanged target price (TP) of RM24.60, based on 32 times price-earnings on an earnings per share forecast of 76.9 sen for FY2024. HLIB, meanwhile, reiterated “hold” on the stock, with an unchanged sum-of-parts-derived TP of RM22.68.
At the time of writing on Thursday, shares in KLK were up two sen or 0.09% at RM21.50, valuing the group at RM23.24 billion.