KUALA LUMPUR (Aug 24): Kuala Lumpur Kepong Bhd (KLK) is believed to be buying a 33% stake in Boustead Plantations Bhd from Lembaga Tabung Angkatan Tentera (LTAT), according to sources.

Sources told The Edge that LTAT will retain a 35% stake in Boustead Plantations.

LTAT’s stake sale comes on the heels of the privatisation of Boustead Plantations' parent company — Boustead Holdings Bhd — two months back. Boustead Holdings is the single largest shareholder of Boustead Plantations with a 57.42% stake, followed by LTAT with a 10.59% stake. Collectively, LTAT owns a 68% stake in Boustead Plantations prior to the share disposal.

Upon completion of the deal, KLK is obliged to make a mandatory general offer (MGO) for Boustead Plantations, whose share price hit a record high of RM1.37 on Wednesday (Aug 23).

Boustead Plantations’ share price has staged a strong rebound from a low of 64 sen on June 8. It has more than doubled within three months to RM1.37 on Wednesday, which was higher than its net assets per share of RM1.30 as at March 31, 2023.

Closing at RM1.37, Boustead Plantations was valued at RM3.068 billion, and at a price-to-earnings ratio of 18.56 times. Dividend yield stood at 5.95%.

Boustead Plantations has suspended the trading of its shares on Thursday (Aug 24). In a filing with Bursa Malaysia, it said the trading suspension is pending on material announcement.

Boustead Plantations owns 42 operating oil palm plantation estates, including 16 plantation estates in Peninsular Malaysia, as well as 26 in Sabah and Sarawak, and 10 palm oil mills, comprising three mills in Peninsular Malaysia, five in Sabah and two in Sarawak.

Its latest annual report stated that 72,300 ha of the group’s landbank is utilised for oil palm cultivation, representing 74% of its total landbank of 97,400 ha. This consists of 23,300 ha in Peninsular Malaysia, 38,700 ha in Sabah and 10,300 ha in Sarawak.

On its financial front, Boustead Plantations reported an 89% drop year-on-year in its first quarter ended March 31, 2023 (1QFY2023). It attributed substantial earnings contraction to lower palm product prices and the adverse impact of fresh fruit bunches valuation.

Its net profit shrunk to RM5.22 million from RM435.16 million in 1QFY2022, while revenue shed 38% to RM199.74 million from RM324.16 million.

As at end-March, Boustead Plantations had short term borrowings of RM451.9 million and long-term borrowings of RM379.7 million. Cash and bank balances stood at RM99.2 million.

Third acquisition by KLK

Boustead Plantations will be the third major acquisition by KLK and its parent company Batu Kawan Bhd within three years.

To recap, Batu Kawan took over Chemical Co of Malaysia Bhd (CCM) in March 2021 at the peak of the Covid-19 pandemic. KLK then made an offer to buyout IJM Plantations Bhd, including IJM Corp Bhd’s 56.2% stake in IJM Plantations.

Batu Kawan bought 56.32% of CCM from Permodalan Nasional Bhd and undertook an MGO for the remaining shares it did not own in the chemical and polymer manufacturer. The RM519.86 million deal strengthened Batu Kawan’s market position as a chlor-alkali chemical manufacturer.