PETALING JAYA: PPB Group Bhd stands to reap a comfortable gain from the strategic proposed merger of Kuok Group’s plantations, refinery and oil and grains businesses with Singapore-based agribusiness group Wilmar International Ltd.
Kuok Group has 39% stake in PPB Group, which in turn holds 55.6% share in PPB Oil Palms Bhd.
Wilmar on Thursday made a general offer to acquire PPB Oil, Kuok Oils & Grains Pte Ltd (KOG) and PGEO Group Sdn Bhd in a S$4.1bil deal.
A plantation analyst with a bank-backed brokerage said the corporate exercise would enable PPB Group to realise the value of its “hidden” assets in plantation and refining businesses by merging with a listed entity, Wilmar, that had a strong global network and marketing presence in emerging markets like China and India.
“By swapping its assets with Wilmar’s shares, PPB Group will have an associate stake in an enlarged group poised to be the world’s largest palm oil refiner, second largest oil palm plantations group and a major biodiesel producer,” she added.
Upon the completion of the proposed merger by the second quarter next year, PPB Group and Kuok Group will hold 18.2% and 31% stake respectively in the enlarged Wilmar.
AmResearch in its latest note said PPB Group, due to its associate stakeholder status in Wilmar, would only be able to enjoy dividend cashflow from Wilmar and would not be able to equity-account Wilmar’s profit contributions.
However, from an asset point of view, holding shares in Wilmar would partly compensate for PPB Group’s loss of upstream and downstream oil palm operations.
The brokerage said: “We estimate PPB Group’s revised net asset value (RNAV) after the corporate exercises at RM5.45, which is 11% higher than the pre-suspension closing price of RM4.90.”
UOB-Kay Hian Securities analyst Leow Huey Chuen said: “The proposed merger will help transform PPB Group from a local conglomerate into a global player via its stake in Wilmar.”
Based on Wilmar’s share price of S$2.05, the RNAV of PPB Group is about RM7.65.
“We believe PPB Group should trade at this RNAV because the group’s assets were monetised via listing through Wilmar in Singapore and Tan Sri Robert Kuok’s injecting his privately-held assets into Wilmar,” Leow added.
Meanwhile, market players reacted positively to the proposed merger as reflected by the sharp movement in PPB Group and PPB Oil shares when they resumed trading on Bursa Malaysia yesterday.
Trading in both stocks was suspended on Wednesday and Thursday.
PPB Oil was the top gainer, closing RM1.55 higher at RM10.50 from its pre-suspension price of RM8.95, while PPB Group added 55 sen to RM5.45.
Wilmar saw its share price rising to S$2.05 on the Singapore Exchange, from its pre-suspension price of S$1.71.