BPlant and Hap Seng Plantation may fit the bill as potential M&A targets

FANNED by high crude palm oil (CPO) prices and under-valuation of small and mid (SMID) caps stocks, two Bursa Malaysia plantation stocks may become potential merger and acquisition (M&A) and/or privatisation targets.

Maybank IB Research has identified the candidates as Boustead Plantation Bhd (BPlant) and Hap Seng Plantations Bhd.

“In our universe of coverage, we believe BPlant (“buy”) is a privatisation candidate as it trades at just 0.55 times PBV (price-to-book value), 0.3 times P/RNAV (price-to-revised net asset value) and EV (enterprise value) per planted hecare of RM34,400,” opined analyst Ong Chee Ting in a plantation sector outlook.

“We also do not discount the possibility of Hap Seng Plantations (not rated) being a privatisation target as the stock trades at an attractive EV per planted ha of RM37,800, PBV of 0.9 times, and with a net cash of 32 sen/share.”

BPlant is 57.4% owned by Boustead Holdings Bhd and 12.1% owned by Lembaga Tabung Angkatan Tentera.

Last week, Hap Seng Consolidated Bhd further raised its stake in Hap Seng Plantation to 74.9% (+15%) by acquiring circa 120 million shares from Innoprise Corporation Sdn Bhd via a direct business transaction for RM264 mil (or RM2.20/share).

“Lastly, according to media reports, Malaysia’s pilgrimage fund (Lembaga Tabung Haji) is considering taking its 74%-owned TH Plantations Bhd (“sell”) private,” reckoned Maybank IB Research.

Earlier, the research house revealed that the plantation sector’s M&A deals in 8M 2021 have surpassed that of 2020 in terms of value with 2021-year-to-date (YTD) M&A activities have surpassed the RM3 bil transacted values recorded in 2020.

At least six M&A transactions worth a combined RM3.56 bil were announced YTD with notable M&A deals since early 2020 being:

  • Kuala Lumpur Kepong Bhd’s (“buy”) ongoing general offer to buy IJM Plantations Bhd worth up to RM2.73 bil;
  • FELDA’s unsuccessful attempt to privatise FGV (N.R) but it successfully raised its equity stake by 44% to 78% (as of March 19) for RM2.1 bil; and
  • The successful privatisation of Kwantas Bhd (delisted; cost RM 200 mil) by its major shareholder. – Sept 6, 2021
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