Accept offer and invest elsewhere, FGV minority shareholders told

WITH only a week before the unconditional mandatory take-over offer by the Federal Land Development Authority (Felda) closes for acceptance on Feb 16 by 5pm Malaysian time, TA Securities Research is advising FGV Holdings Bhd’s minority shareholder to accept the offer on the table.

“Investors can switch to other undervalued plantation stocks with more compelling stories and potentially higher earnings growth such as TSH Resources Bhd (target price [TP]: RM1.29) and IJM Plantations Bhd (TP: RM2.40),” reckoned analyst Angeline Chin in a company update.

To gauge whether the acceptance level can exceed the 90% threshold for compulsory acquisition, the research house suggested that investors should start monitoring the daily transaction volume before the offer lapses on Feb 16.

According to Bursa Malaysia announcements, the public shareholding spread of FGV has dropped to 23.93% of its issued share capital which is below the minimum required level of 25% under the listing requirements.

The shortfall in the public shareholding spread was a direct consequence of Felda mopping up FGV’s shares in the open market since its announcement of the unconditional mandatory takeover offer on Jan 12.

As of Feb 5, Felda holds about 68.3% shares in FGV. To recap, Felda had on Dec 8 acquired a 6.1% stake held by Kumpulan Wang Persaraan (Diperbadankan) (KWAP) and a 7.78% interest held by Urusharta Jamaah Sdn Bhd for RM658 mil.

If Felda received 90% or more of FGV shares (excluding treasury shares), Bursa Securities Bhd will suspend the trading in FGV shares immediately upon expiry of five market days from the closing date of the offer.

“Subsequently, Felda will submit a request to FGV to take the necessary procedures to withdraw its listing status,” explained TA Securities Research.

“Otherwise, a special resolution may need to be carried out in an extraordinary general meeting (EGM) if Felda failed to meet the 90% threshold for acceptance but hold more than 75% of independent shares.”

Recall that Felda’s proposed acquisition of FGV is part of its transformation plan to enhance its ability to control the plantation land and integrated value-chain of FGV and the latter’s subsidiaries.

Moreover, this will also provide Felda access to downstream activities undertaken by FGV in the plantation sector.

All-in, TA Securities Research maintained its “sell” rating on FGV with an unchanged target price of RM1.30.

At 9.22am, FGV was unchanged at RM1.30 with 98,200 shares traded, thus valuing the company at RM4.74 bil. – Feb 9, 2021

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