KUALA LUMPUR: Investors chased shares of Glenealy Plantations (Malaya) Bhd and Lingui Developments Bhd yesterday following last Friday’s announcement by both companies that they had received takeover offers from parent company Samling Strategic Corp Sdn Bhd.
Glenealy, which operates oil palm plantations in Malaysia and Indonesia, saw its shares rise as much as 66 sen or 10% yesterday to RM7.21, its highest in 14 years, since October 1997, before ending at RM7.13 for a market value of RM822.53 million. The stock, which had some 149,700 shares traded yesterday, had gained 18% this year, surpassing the FBM KLCI’s 1% decline.
Shares in Lingui, a wood products manufacturer, gained up to 20 sen or 15% to RM1.56 before closing at RM1.52 for a market capitalisation of RM1 billion. The stock, which saw 2.56 million shares exchange hands yesterday, had also gained 18% this year.
Trading in both stocks resumed yesterday after a suspension between Jan 20 and Jan 27. Prior to the suspension, Glenealy and Lingui were last traded at RM6.55 and RM1.36 respectively.
Samling Strategic, a wholly owned private entity of Tan Sri Yaw Teck Seng and his family, is offering to buy the remaining shares in Glenealy at an indicative price of RM7.50 each and the remaining stake in Lingui at RM1.63 per share.
Samling Strategic already owns 53.69% in Glenealy and 67.2% in Lingui. The takeover offer for both companies is in conjunction with the parent firm’s intention to privatise its 54% Hong Kong-listed subsidiary Samling Global Ltd, a wood products entity, at HK$0.76 a share. Samling Global owns 67.2% of Lingui, which in turn is a major shareholder of Glenealy.
Trading in Samling Global shares, which was suspended since Jan 20 at HK$0.375 prior to the privatisation announcement, resumed at 1.30 pm yesterday. The stock surged 87% to close at HK$0.70 for a market worth of HK$3.01 billion. The stock had gained 84% this year compared to the Hang Seng Index’s 9% gain.
In a note yesterday, OSK Research said the offer price for Glenealy, which translates into an enterprise value (EV) per planted hectare of US$8,400 (RM25,536), undervalues the plantation firm.
“We believe the offer undervalues Glenealy and opens up the possibility of an outside party making a competing bid. Given this view, we advise shareholders to hold out for a higher offer price and maintain our fair value at RM8.23, based on 12 times CY12 price-earnings ratio (PER),” said the research firm.
OSK added that should Glenealy’s assets be valued at an EV per ha of US$12,000, being a recent transacted valuation for plantation land in Indonesia, Glenealy shares would be valued at RM10.26, a premium of 37% over the RM7.50 offer price.
RHB Research, however, deemed the offer prices for Lingui and Glenealy as fair. At RM1.63 for Lingui, the offer price values the firm’s timber business at a forward PER of about 10 times which is higher than the fair valuation of eight times for the timber sector, it said.
The RM7.50 offer price for Glenealy values the company at a forward PER of 12.8 times, which is near RHB’s target of 13 times for mid-sized plantation firms.
According to RHB Research, it should not be difficult for Samling Strategic to secure financing for the takeover exercise as it will have access to a cash pile of RM560 million upon the privatisation of Samling Global, Lingui and Glenealy. It also notes that the companies to be privatised have strong operating cash flow and minimal capital expenditure commitments.
RHB has upgraded its recommendation for Lingui from “underperform” to “neutral” and raised the fair value for the stock from RM1.33 to RM1.63.
Glenealy’s financials have improved significantly. Net profit more than doubled to RM19.02 million in the first quarter ended Sept 30, 2011 from RM7.41 million a year earlier. Revenue was up 68% to RM71.68 million from RM42.61 million. Debt free Glenealy had a cash pile of RM173.47 million as at Sept 30 last year. Its latest reported net assets per share stood at RM5.28.
Lingui, however, sank into a net loss of RM28.07 million in the first quarter ended Sept 30, 2011 againts a net profit of RM39.01 million a year earlier despite revenue adding 20% to RM435.01 million from RM365.06 million.
The net loss was mainly due to accounting losses in the fair value of its biological assets, apart from higher operating and finance expenses, according to notes accompanying its latest financials.
Lingui had cash of RM83.59 million against debts of RM621.12 million, translating into a net debt of RM537.53 million. Its latest reported net assets stood at RM2.47 per share.
This article appeared in The Edge Financial Daily, January 31, 2012.
Glenealy, which operates oil palm plantations in Malaysia and Indonesia, saw its shares rise as much as 66 sen or 10% yesterday to RM7.21, its highest in 14 years, since October 1997, before ending at RM7.13 for a market value of RM822.53 million. The stock, which had some 149,700 shares traded yesterday, had gained 18% this year, surpassing the FBM KLCI’s 1% decline.
Shares in Lingui, a wood products manufacturer, gained up to 20 sen or 15% to RM1.56 before closing at RM1.52 for a market capitalisation of RM1 billion. The stock, which saw 2.56 million shares exchange hands yesterday, had also gained 18% this year.
Trading in both stocks resumed yesterday after a suspension between Jan 20 and Jan 27. Prior to the suspension, Glenealy and Lingui were last traded at RM6.55 and RM1.36 respectively.
Samling Strategic, a wholly owned private entity of Tan Sri Yaw Teck Seng and his family, is offering to buy the remaining shares in Glenealy at an indicative price of RM7.50 each and the remaining stake in Lingui at RM1.63 per share.
Samling Strategic already owns 53.69% in Glenealy and 67.2% in Lingui. The takeover offer for both companies is in conjunction with the parent firm’s intention to privatise its 54% Hong Kong-listed subsidiary Samling Global Ltd, a wood products entity, at HK$0.76 a share. Samling Global owns 67.2% of Lingui, which in turn is a major shareholder of Glenealy.
Trading in Samling Global shares, which was suspended since Jan 20 at HK$0.375 prior to the privatisation announcement, resumed at 1.30 pm yesterday. The stock surged 87% to close at HK$0.70 for a market worth of HK$3.01 billion. The stock had gained 84% this year compared to the Hang Seng Index’s 9% gain.
In a note yesterday, OSK Research said the offer price for Glenealy, which translates into an enterprise value (EV) per planted hectare of US$8,400 (RM25,536), undervalues the plantation firm.
“We believe the offer undervalues Glenealy and opens up the possibility of an outside party making a competing bid. Given this view, we advise shareholders to hold out for a higher offer price and maintain our fair value at RM8.23, based on 12 times CY12 price-earnings ratio (PER),” said the research firm.
OSK added that should Glenealy’s assets be valued at an EV per ha of US$12,000, being a recent transacted valuation for plantation land in Indonesia, Glenealy shares would be valued at RM10.26, a premium of 37% over the RM7.50 offer price.
RHB Research, however, deemed the offer prices for Lingui and Glenealy as fair. At RM1.63 for Lingui, the offer price values the firm’s timber business at a forward PER of about 10 times which is higher than the fair valuation of eight times for the timber sector, it said.
The RM7.50 offer price for Glenealy values the company at a forward PER of 12.8 times, which is near RHB’s target of 13 times for mid-sized plantation firms.
According to RHB Research, it should not be difficult for Samling Strategic to secure financing for the takeover exercise as it will have access to a cash pile of RM560 million upon the privatisation of Samling Global, Lingui and Glenealy. It also notes that the companies to be privatised have strong operating cash flow and minimal capital expenditure commitments.
RHB has upgraded its recommendation for Lingui from “underperform” to “neutral” and raised the fair value for the stock from RM1.33 to RM1.63.
Glenealy’s financials have improved significantly. Net profit more than doubled to RM19.02 million in the first quarter ended Sept 30, 2011 from RM7.41 million a year earlier. Revenue was up 68% to RM71.68 million from RM42.61 million. Debt free Glenealy had a cash pile of RM173.47 million as at Sept 30 last year. Its latest reported net assets per share stood at RM5.28.
Lingui, however, sank into a net loss of RM28.07 million in the first quarter ended Sept 30, 2011 againts a net profit of RM39.01 million a year earlier despite revenue adding 20% to RM435.01 million from RM365.06 million.
The net loss was mainly due to accounting losses in the fair value of its biological assets, apart from higher operating and finance expenses, according to notes accompanying its latest financials.
Lingui had cash of RM83.59 million against debts of RM621.12 million, translating into a net debt of RM537.53 million. Its latest reported net assets stood at RM2.47 per share.
This article appeared in The Edge Financial Daily, January 31, 2012.
