- Kulim Bhd released its comments in response to the rejection of its offer by the independent directors of NBPOL (New Britain Palm Oil Ltd) last week.

- Kulim disagrees with the statement that its offer of GBP5.50/share for NBPOL is unfair and unreasonable.

- Kulim said that its offer price is within the range of fair values of GBP4.39 to GBP10.14/share for NBPOL estimated by the independent adviser, BDO LLP.

- BDO used the DCF method as its valuation methodology.

- Kulim’s offer price is also within the fair values of GBP3.84 to GBP6.22 based on market multiple valuation methods such as PE, EV/EBITDA and EV/ha.

- Kulim has concerns with BDO’s DCF assumptions as BDO had assumed as a base case that CPO price would rise linearly from US$845/tonne (RM2,769/tonne) in 2013F to a long-term price of US$1,100/tonne (RM3,605/tonne) by 2021F.

- Kulim views the long-term base CPO price of US$1,100/tonne (RM3,605/tonne) as aggressive as the current CPO price is only US$705/tonne (RM2,310/tonne).

- CPO price closed at RM2,367/tonne last Friday.

- We are neutral on this development. As we have mentioned before in previous reports, Kulim’s FY14F net profit would rise 3% to 5% if it were to consolidate NBPOL’s earnings based on a shareholding of 68.97%.

- Currently, Kulim’s equity interest in NBPOL is 48.97%.

- NBPOL’s core pre-tax profit fell 77.8% to US$14.1mil in 1HFY13 due to unfavourable weather in 1QFY13. FFB production was 3.3% YoY lower in 1HFY13. Maintain HOLD on Kulim.

Source: AmeSecurities