PETALING JAYA: Merger and acquisition (M&A) activities among local plantation companies continue to remain robust this year.
This is despite the plantation industry suffering its lowest profitability per hectare in 18 years, said Maybank IB Research.
Among the key M&A developments so far include the proposed privatisation of Kwantas Corp Bhd, the proposal by Kuala Lumpur Kepong Bhd to acquire 10,816ha of planted oil palm estates from TSH Resources Bhd for US$110mil (RM459mil) cash and Sime Darby Plantation Bhd’s disposal of 170ha of land for RM159mil cash in the second quarter of 2020.
The M&A activities picked up momentum in the first half of this year after slowing down slightly last year, the research unit said in its latest plantation report.
Maybank IB also noted that about half of the 43 plantation companies under the Bursa Malaysia list had reported insider or major shareholder equity movements since early 2019. It said insiders or major shareholders of 19 companies have increased their stakes, as compared with just two companies, which lowered their stakes.
The research unit pointed out that “most of the notable movements were evident for stocks that trade at or are below one times the historical price-to-book value”. “We think Boustead Plantations Bhd is a prime privatisation target as it is trading at just 0.4 times the price-to-book value and 0.2 times the price-to-revised net asset value, ” added the research unit.
Since early 2019, major shareholders of Hap Seng Plantations Bhd, United Malacca Bhd, Dutaland Bhd, PLS Plantations Bhd, Genting Plantations Bhd, Sin Heng Chan Bhd, TSH Resources, Golden Land Bhd and Sarawak Oil Palms Bhd have added meaningful equity stakes.
The research unit noted that “the icing on the cake was the privatisation offer by Kwantas’ major shareholder of up to RM205mil or RM1.65 per share announced on Aug 26 via a proposed selective capital reduction and repayment exercise for the remaining 39.88% shares not held by the major shareholders”.
Maybank IB had previously reported that the M&A activities are expected to remain robust in the second half of the year and 2021 as “a few companies have publicly made known of their intentions to restructure, restrategise and/or deleverage”.
The research house said that plantation land or estate and plantation-related transactions within Malaysia amounted to RM647mil in the first half of 2020, surpassing total transactions done at RM528mil in 2019.
Maybank IB is maintaining a neutral call on the sector, adding that there are several risk factors that may affect its sector view, earnings estimates, price targets and ratings of the stocks under coverage.
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