The proposed privatisation of conglomerate Boustead Holdings Bhd (BHB) from Bursa Malaysia by Lembaga Tabung Angkatan Tentera (LTAT) has been hailed as a good move by analysts.
Rakuten Trade vice president Vincent Lau told FocusM that the privatisation was a strategic move as many companies listed on Bursa were undervalued in tandem with the downturn in the market.
“I think the privatisation is a good move as the stock is undervalued at the moment and promoters can derive value from this privatisation,” said Lau.
LTAT had declared its intention to take its 59%-owned BHB private at an indicative price of 80 sen per share. Its current share price is 66.5 sen.
However, the army fund said in a statement that the notification does not amount to a firm intention that it will undertake the proposal. “Accordingly, there can be no certainty that we will proceed with the proposal.
“If we decide to proceed with the proposal, we expect to propose an offer price of 80 sen per ordinary share in BHB. This offer price is indicative only and non-binding. The final offer price in relation to the proposal (if undertaken) is subject to finalisation by LTAT,” said LTAT in a statement.
The indicative price of 80 sen per share given by LTAT is about 17% premium over today’s current price. However, it is less than half of the conglomerate’s net asset per share of RM1.85 as at end-2019.
BHB’s total borrowings stood at RM7.91 bil as at end-2019.
William Ng, chief investment officer at Leinves PLT, told FocusM that while the privatisation was positive for LTAT, the indicative price for minority shareholders was a tad too low.
“Considering that many shareholders had bought BHB shares at a few ringgit, the offer of 80 sen was on the low side. Even the NTA per share of BHB is around RM1.85,” he said.
He added that minorities might lose out if they agree to the deal.
The diversified conglomerate is the main provider to LTAT’s dividend income. However, over the past three years, the group’s dividend per share has been on a downward trend. For its financial year ended Dec 31, 2019 (FY19), BHB did not declare a dividend. Previously, it had declared a five sen dividend in FY18, 11 sen dividend in FY17, and 17.5 sen in FY16.
BHB has equity interest in four publicly listed companies (PLCs), namely Affin Bank Bhd, Boustead Plantations Bhd, Boustead Heavy Industries Corp Bhd (BHIC) and Pharmaniaga Bhd. LTAT also has holdings in all these companies.
The privatisation will see LTAT strengthen its holding in these PLCs. BHB holds a 20.73% stake in Affin Bank, its third-largest shareholder after LTAT, which is the largest stakeholder with a 35.33% stake, and Bank of East Asia (23.56%).
For Boustead Plantations Bhd, BHB is the planter’s largest shareholder, controlling a 57.42% stake as of April 30. LTAT is the second-largest shareholder, controlling a 12.1% stake.
BHB holds a controlling stake in BHIC. According to its 2018 annual report, BHB has the largest stake in BHIC at 65%, while LTAT holds a 8.16% stake.
For pharmaceutical company Pharmaniaga Bhd, BHB holds a 56.09% stake while LTAT owns an 11.23% holding.
BHB’s share price closed 3.6% lower to 67 sen on June 1. – June 1, 2020
