• We view positively Kuala Lumpur Kepong (KLK) deals to be Boustead Plantation (BPLant) shareholders.

• Should the deal materialise, the entry of KLK offers great potential synergies on the back of BPlant that could leverage on KLK expertise to improve efficiency and productivity at BPlant's plantations estates over the long term.

• Revised our Target Price higher to RM1.55 (from RM0.65 previously) to aligns with the current offer price from KLK, aimed at leveraging the ongoing offer. As such, for shareholders who are already invested, we recommend retaining their positons and consider the cash offer.

Details of the Offer. KLK announced that it has entered into a strategic collaboration agreement with Boustead Holdings Berhad (BHB) and LTAT, to collaborate in enhancing the efficiency of estates and improve crude palm oil yield at BPlant's plantations over the long term. As part of this collaboration, KLK is planning to acquire 739.2mn shares of BPlant, which represents 33% plus one share of the total shares from BHB, with a cash consideration of RM1.15bn or RM1.55/share. Upon successful completion of this acquisition, KLK's ownership stake in BPlant will rise from zero to 33% plus one share. Conversely, BHB and LTAT will maintain their combined equity interest of approximately 35% in BPlant. Subsequently, BHB and LTAT will join KLK as joint offerors (JO), and they will be obligated to extend a mandatory takeover offer to acquire all the remaining BPlant shares that are not owned by the JO at a cash price of MYR1.55/share. The acceptance of the offer is subject to the approvals by BHB shareholders and relevant authorities which is targeted to be completed by the 4Q23.

In-Depth Insights into the Offer. The offer price of RM1.55/share results drives the total market value of BPlant to RM3.47bn. This offer price represents a 13% premium to BPlant's Wednesday closing price of RM1.37/share. It's pertinent to emphasize that the share price has traded within the range of RM0.60 to RM1.51 throughout the past year, up to Friday, the 25th. With the offer price being set at RM1.55/share, resulting valuation equates to a P/B ratio of 1.21x, based on unaudited financial statement dated June 2023. This valuation stands out significantly compared to BPlant's historical average P/B ratio of 0.57x over the last 5 years. Conversely, pegging BPlant at RM1.55/share leads to an Enterprise Value (EV) of approximately RM58,000 per planted hectare, or a multiple of 66x based on consensus earnings projected for 2023 and 2024. Considering these factors, we hold the view that this offer would bring forth benefits for the minority shareholders of BPlant, thereby being regarded as a favorable proposition for BPlant's shareholders.

Our call. Revised our TP higher to RM1.55 (from RM0.65 previously) to aligns with the current offer price from KLK, aimed at leveraging the ongoing offer. As such, for shareholders who have already invested, we recommend retaining their positions and consider the cash offer.

Source: BIMB Securities Research - 28 Aug 2023