• Lembaga Tabung Angkatan Tentera (LTAT) has been granted an extension of the closing date for its RM1.55/share offer to privatize Boustead Plantation (BPlant). The new deadline is January 5th , 2024, which was extended from the original deadline of December 22, 2023.

• This extension is attributed to BPlant's failure to meet the 25% minimum spread requirement, given that LTAT has accumulated 88.62% of BPlant's total issued shares as of December 20, leaving the current shareholding spread at just 11.38%. However, this noncompliance is inconsequential to LTAT, given their intention to privatize BPlant.

• Maintain a SELL call with TP of RM1.55. For shareholders who have already invested, we recommend considering the cash offer of RM1.55/share from LTAT.

What in store. To recap, the unconditional mandatory takeover offer (MTO) by LTAT was based on LTAT’s agreement with Boustead Holdings Bhd followed the fallout of the RM1.15bn takeover deal by Kuala Lumpur Kepong Bhd (KLK) in October. The primary rationale for LTAT's MTO was to secure greater flexibility in shaping the strategic direction of BPlant. The goal is to expedite the implementation of value creation plans aligned with LTAT's commitment to enhancing asset quality, thereby ensuring sustainable returns for its stakeholders, as outlined in the LTAT Strategic Plan 2023-2025. As per the Bursa Malaysia announcement on December 20, an extension has been granted to LTAT for the closure of its privatization offer for BPlant at RM1.55 per share. The new deadline is set for January 5, 2024, as opposed to the initial cutoff date of December 22, 2023. This extension is attributed to BPlant's failure to meet the 25% minimum spread requirement. LTAT has, as of December 20, acquired 88.62% of BPlant's total issued shares, resulting in a current shareholding spread of only 11.38%. Nevertheless, this non-compliance holds minimal significance for LTAT, given its intention to proceed with the privatization of BPlant.

Outlook. As BPlant operates solely as a pure upstream player, we maintain our view that BPB's earnings potential is at risk under the following circumstances: 1) a significant retreat in palm product prices, 2) an escalation in operational costs, 3) continued suboptimal production due to lower yield, and 4) an inability to capitalize on the monetization of plantation landbank.

Our call. Maintain a SELL call with unchanged target price (TP) of RM1.55 to align with the current offer price from LTAT, leveraging the ongoing offer. For shareholders who have already invested, we recommend considering the cash offer of RM1.55 per share from LTAT.

Source: BIMB Securities Research - 21 Dec 2023