MIDF Research: Termination of BPlant stake sale a missed opportunity to ride on KLK’s proven expertise

MIDF Research has deemed as “unfortunate” that the Lembaga Tabung Angkatan Tentera (LTAT)-Boustead Holdings Bhd (BHB) stake sale of Boustead Plantations Bhd (BPlant) to Kuala Lumpur Kepong Bhd (KLK) has fallen through.

“After receiving backlash from opposition leaders on the SCA with KLK over a concern Bumiputera shareholding where it deems the selling stake doesn’t align with the 30% Bumiputera corporate equity target by 2025, LTAT and BHB decided to terminate the deal,” lamented the research house in a KLK company update.

“It’s unfortunate for BPlant as offer price were quite compelling and shareholders could have ride on KLK outstanding operation.”

Moreover, the research house has also described the pullback from SCA as “a missed opportunity for BPlant to leverage KLK’s proven expertise”.

“While KLK overall yields for FY2022 was among the lowest in the past 10 years due to yield dilution from IJM Plantation Bhd’s acquisition in the prior year, it remains among the top tier if we were to compare in term of OER (oil extraction rate), fresh fruit bunch (FFB) yield, age profile as well oil yield,” justified MIDF Research.

Nevertheless, this termination does not have a material effect on KLK given BHB shall return the deposit (an equivalent to RM229.2 mil) to KLK within 14 business days from yesterday (Oct 4) or a later date that is agreed upon by both parties.

Meanwhile, Kenanga Research has accorded an “accept offer” call on the latest move by LTAT to replace KLK in making a mandatory general offer (MGO) to take BPlant private at RM1.55/share.

“We welcome the MGO as it allows BPlant shareholders 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 NTA (net tangible asset),” opined analyst Teh Kian Yeong in a BPlant company update.

“Risks to our call include: (i) abortion of the deal, (ii) lower-than-expected CPO (crude palm oil) prices, and (iii) higher-than-expected rise in costs.”

Recall that KLK had on Aug 24 announced that it has entered into a SCA with the controlling shareholders of BPlant, namely BHB and LTAT.

A highlighted aim of the collaboration was to enhance the “operational efficiencies” of BPlant. The SCA would also entailed KLK buying a 33%+ one share stake in BPlant from BHB for RM1.146 bil (RM1.55/share).

However, deadline for the cut-off date of the SCA was extended twice (first from Sept 11 to Sept 22 and later to Oct 6). At the time of writing, KLK has already acquired 69.3 million shares (equivalent to 3.1% stake) in BPlant via open market transactions.

At 11.22am, BPlant was up 8 sen or 6.3% to RM1.35 with 51.54 million shares traded, thus valuing the planter at RM3.02 bil. – Oct 5, 2023

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