Boustead Plantations a prime privatisation target


  • Analyst Reports
  • Monday, 21 Sep 2020

“Boustead Plantation trades at an undemanding 0.43 times price-to-book value (PBV), and 0.26 times price/realised net asset value (P/RNAV). Maintain Buy with an unchanged discounted RNAV target price of 62 sen a share, ” it said. Its closing price was 49 sen.

KUALA LUMPUR: Boustead Plantations is a prime privatisation target by its immediate holding company, Boustead Holdings Bhd, which will result in an “acquisition gain” for the latter.

Maybank Investment Bank Research said on Monday this privatisation exercise can be self-funded by disposing some small parcels of land owned by Boustead Plantations.

“Our core earnings risk is on the upside if CPO average selling price (ASP) is higher than our forecasts of RM2,400 for FY20 and RM2,400 in 21E.

“Every RM100 a tonne change in CPO ASP impacts our FY20E/FY21E core profit after tax and minority interest by RM17mil/RM18mil as itis highly leveraged to CPO price movements.

“Boustead Plantations trades at an undemanding 0.43 times price-to-book value (PBV), and 0.26 times price/realised net asset value (P/RNAV). Maintain Buy with an unchanged discounted RNAV target price of 62 sen a share, ” it said. Its closing price was 49 sen.

Maybank IB Research offered few possible reasons; (1) Boustead will record a huge accounting “acquisition gain” if it privatises Boustead Plantations at a significant discount to its BV.

For instance, by its estimate, Boustead will likely record gains of up to RM389mil (subject to Boustead’s group consolidation adjustments, if any) for the remaining 30.48% equity stake not owned by Boustead (and LTAT, the ultimate holding company) if it sets an offer price at 0.5 times Boustead Plantation’s BV. The gains will reduce proportionately if a higher PBV is offered.

(2) At 0.5 times PBV offer, Boustead will need to fork out up to RM389mil to take Boustead Plantations private.

(3) Post-privatisation, Boustead Plantations can sell some of its 98,212 ha land, recognise some disposal gains and pay higher dividends to cover for Boustead’s privatisation cost.

Boustead Plantations has18,419 ha of freehold land, of which 10,412 ha are prime land. Maybank Research’s latest estimate is Boustead Plantation’s RNAV is worth RM1.86 a share or RM4.164bil.

Even if Boustead Plantations is not privatised, a revival of its asset monetization exercise would lead to further re-rating as earnings will be lifted by disposal gains and raises the possibility of higher dividend payouts.

Since listing in 2014, Boustead Plantations has sold 2,164 ha of land, raised RM1bil in gross proceeds, and recognised total disposal gains of RM900mil. It has also paid out RM1bil in total dividends since listing.

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