- Bloomberg reported that the independent directors of New Britain Palm Oil Ltd (NBPOL) has rejected Kulim’s partial take-over of its shares.

- The independent directors said that Kulim’s offer is “neither fair nor reasonable”.

- According to reports, the independent adviser said that the fair value of NBPOL is between GBP6.50 and GBP7.00/share. Kulim’s partial take-over for NBPOL is at a price of GBP5.50/share.

- NBPOL’s shareholders have until 28 August 2013 to accept Kulim’s offer.

- We are neutral on this. There is always a possibility that NBPOL’s shareholders may not follow the opinion of NBPOL’s independent directors.

- Kulim’s offer of GBP5.50/share for NBPOL is 15% higher than the latter’s closing price of GBP4.7750/share. In addition, Kulim’s offer for NBPOL values the group at a FY14F PE of 16.8x.

- In its recent 1HFY13 results, NBPOL reported a pre-tax profit (excluding fair value gains on biological assets) of US$14.1mil, which was 77.8% lower than the US$63.6mil achieved in 1HFY12. The group’s FFB output was 3.3% YoY lower in 1HFY13.

- Recall that NBPOL was hit by extremely wet weather in 1QFY13, which affected its harvesting of FFB. Consensus has forecasted NBPOL’s net profit to rise from US$50.3mil in FY13F to US$95.7mil in FY14F.

- Previously, we estimated that Kulim’s FY14F net profit would improve by 3% to 5% if Kulim were to consolidate NBPOL’s earnings based on a shareholding of 68.97%. This assumes that Kulim receives 20% acceptances from NBPOL’s shareholders that it has proposed to buy out.

- Currently, Kulim holds a 48.97% stake in NBPOL. The West New Britain Provincial Government is the second largest shareholder in NBPOL with an 8% equity interest. Maintain HOLD on Kulim.

Source: AmeSecurities