PETALING JAYA: The offer price for Glenealy Plantations (Malaya) Bhd in a proposed privatisation exercise is too low, according to OSK Research. However, RHB Research Institute said the offer price for Lingui Developments Bhd in the same proposed privatisation exercise is fair. Last Friday, Bursa Malaysia was told that Samling Strategic Corp Sdn Bhd (SSC) had proposed to privatise Hong Kong-listed unit Samling Global Ltd (SGL), and in turn to privatise timber firm Lingui and associate company Glenealy.
The privatisation exercise would be conditional, among other things, upon the approval of the independent shareholders of SGL. SSC indicated that it expected to propose an offer price of RM1.63 per share for Lingui and RM7.50 per share for Glenealy. The offer prices were indicative only, was non-binding and may be subject to variation.
Lingui is an integrated forest resource and wood products company, with upstream and downstream timber operations, while Glenealy is involved in the operations of oil palm plantations in Sabah and Sarawak, and Indonesia. Lingui and Glenealy are controlled by the diversified Miri-based Samling Group headed by Tan Sri Yaw Teck Seng.
In a report, OSK Research said the offer price for Glenealy was a 14.5% premium over the plantation company's closing price of RM6.55 per share on Jan 19, and a 20.4% premium to its last average one-month share price. The research house said SSC would need to fork out RM400.6mil cash to buy out Glenealy's minority shareholders, as SSC holds an effective stake of 53.7% in Glenealy (by combining Lingui's 38.3% stake and SSC's own 15.4% direct stake).
OSK Research opined that the indicative offer price of RM7.50 per share for Glenealy was “too cheap” as it valued the company's enterprise value (EV) at US$8,400 (RM25,666) per planted ha for its operations in Sabah, Sarawak and Indonesia. According to OSK Research, the sector has an average of about US$16,000 (RM48,888) EV per planted ha. “At a valuation of US$12,000 (RM36,661) EV per planted ha (recent transacted prices for Indonesian plantations) for Glenealy's planted estates, the stock would be valued at RM10.26 per share, which is 36.8% higher than the indicative offer price of RM7.50.” OSK Research advised Glenealy's shareholders to hold out for a higher offer price as there was the possibility of an outside party making a competing bid.
Meanwhile, RHB Research believed that the funding for the proposed privatisation exercises would not be an issue, although the total amount required to privatise all the three public-listed entities would be more than RM1bil. “It will not be difficult for SSC to secure funding as it would have control over RM560mil cash upon completing the privatisation exercises, and all the three companies have strong operating cashflow with minimal capital expenditure spending.”
RHB Research said the indicative offer price of RM1.63 per Lingui share seemed fair, as it valued the company at a price to earnings ratio (PER) of nine to 10 times based on a calendar year (CY) 2012's earnings per share (EPS) forecast. “The valuation is slightly higher than our current target PER of eight times for the timber sector, and comparable with its closest and more liquid peer WTK Holdings Bhd, which is currently trading at a PER of 9.5 times CY2012's EPS.”
OSK Research maintained its “buy” call on Glenealy's stock, and a fair value of RM8.23 per share based on 12 times CY2012's PER. RHB Research upgraded it call on Lingui's stock to a “trading buy” and revised its fair value to RM1.63 per share.
Glenealy's stock was the top gainer yesterday, closing 58 sen higher to RM7.13 per share while Lingui's stock closed 16 sen higher to RM1.52 per share. It was the highest share price for Glenealy in more than 14 years.
By THOMAS HUONG
huong@thestar.com.my
