PINEHILL Pacific Bhd is faced with an interesting conundrum.
The company has oodles of cash which is something of a rarity in these challenging times but it also faces the censure of authorities if is it does not come up with a regularisation plan accepted by Bursa Malaysia within the stipulated time.
On the other side of the equation, if one were to be an investor, wouldn’t this be an alluring opportunity to adhere to Lord Buddha’s wisdom that nothing in life is mightier than patience by just waiting for the opportune time to get a share of the spoils?
The plantation-based company falls under the ambit of Paragraph 8.03A(2) of the Main Market Listing Requirements (MMLR) of Bursa Malaysia on Sept 3, 2019 following the completion of a disposal exercise of its 9,000-acre plantation assets in the district of Hilir Perak to United Plantations Bhd for RM413.57 mil cash.
With barely a quarter left (until Sept 3) to submit a regularisation plan to the relevant authorities for approval, the above seems to be the only option for both the owners and investors of Pinehill Pacific Bhd to weigh.
A check on the company’s profile reveals that Pinehill Pacific operates as an investment holding company which engages in the development and operation of palm oil plantation.
Its plantation segment which contributes a huge chunk of its revenue deals with oil palm cultivation and processing of palm oil that produces crude palm oil (CPO), palm kernel and other oil palm products for sale.
Few other options
While cashing out on the part of the company owner – a move which entails the delisting of Pinehill Pacific from Bursa Malaysia – may seem to be the easiest option, keeping the company’s listing status intact may not be bad idea either given the current high CPO price (RM4,506 per metric tonne on May 12).
This is given there is also an express provision in paragraph 8.03A for an affected listed issuer to apply not to undertake any regularisation plan if it is able to demonstrate to the market regulator satisfaction that its remaining business is viable, sustainable and has growth prospects with appropriate justifications, and that its level of operations remains suitable for continued listing.
Although stock market analysts are generally wary if the current CPO prices are sustainable – with many market observers expecting the prices to soften in 2H 2021 – small-cap palm oil stocks like Pinehill Pacific do reign supreme in their own ways.
In a plantation sector review dated May 19, PublicInvest Research has suggested that investors look into small-mid cap plantation companies which give more attractive upside compared to their big cap counterparts.
This is given that despite the sharp rally in CPO prices, there has been little share price reaction for major plantation counters in view of poor liquidity and increasing concerns over ESG (environment, social and governance) practices.
But given that acquiring a plantation outfit may not sound a viable option amid current sluggish economic conditions, Pinehill Pacific can opt to venture into new yet potentially lucrative business areas that promise consistent income such as renewable energy (solar power) or being an independent power producer (IPP), to name a few options.
As it is, the current scenario is such that the share price of Pinehill Pacific is trading at a massive discount against its net tangible asset (NTA).
Amid a pandemic-ravaged economy, it is unlikely to be many counters that boast large cash pile (RM413.57 mil cash proceeds from disposal of its plantation assets to United Plantations) that can easily be mobilised to undertake viable projects. This is an interesting proposition.
In the event that all potential doors remain shut to the company come Sept 3, it can always choose to part way with its shareholders in an elated manner through a special dividend pay-out in excess of 85 sen/share based on its current cash holding.
At the close of last week’s trading, Pinehill Pacific was down 1.5 sen or 3.06% at 47.5 sen with 346,400 shares traded, thus valuing the company at RM71 mil.
As of 10.35am, Pinehill Pacific was up 1.5 sen or 3.16% with 29,000 shares traded, thus valuing the company at RM73 mil – May 24, 2021
