Hard to resist: Analysts tell IJM Plant shareholders to grab KLK’s offer

EVEN prior to shareholders’ approval at an extraordinary general meeting (EGM), the writing seems to be already on the wall that IJM Plantations Bhd’s investors will vote in favour of a disposal to Kuala Lumpur Kepong Bhd (KLK).

Kenanga Research foresees that this will eventually trigger a mandatory general offer (MGO) with KLK likely to extend a similar offer of RM3.10/share (in addition to 10 sen dividend per share) to the remaining shareholders.

“We recommend “accept offer” given the premium valuation against closest peer – price-to-earnings ratio (PER) (41%); price-to-book value (PBV) (101%); and enterprise value (EV)/planted hectarage (39%),” opined analyst Adrian Kok in a company update.

On Friday (June 11), IJM Corp Bhd announced that its board has accepted KLK’s offer for its 56% stake in IJM Plantations at the offer price of RM3.10/share. The acquisition is still subject to shareholders’ approvals at an EGM which will be convened at a later date.

MIDF Research also sees KLK’s offer as a good opportunity to exit IJM Plantations.

“Based on our observation, IJM Plantations has been registering losses for the past few years and only managed to return to profitability since FY2020,” justified the research house. “Given the erratic earnings trend, we think this is a good opportunity for IJM Plantations’ shareholders to exit.”

Moreover, after peaking in 2016, MIDF Research observed that IJM Plantation’s share price and valuations have been languishing prior to the current offer.

“Coupled with ESG (environmental, social and governance) concerns, we think it is unlikely for IJM Plantation’s share price to return to its prior peak levels,” noted the research house.

Below is MIDF Research’s final verdict:

“We do note that the group’s improvement in recent earnings have largely been contributed by the advancement in commodity prices.

“Nonetheless, due to the group’s earnings fluctuation in the past few years we opine the offer by KLK presents a good opportunity for IJM Plantations shareholders to exit.

“We recommend investors to accept the mandatory offer by KLK at RM3.10/share once it is served.”

At 9.47am, IJM Plantations was up 2 sen or 0.65% to RM3.10 with 1.63 million shares traded, thus valuing the company at RM2.71 bil. – June 14, 2021

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