Timely for KLK to ac­quire MP Evans

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: PublicIn­vest Re­search views Kuala Lumpur Ke­pong Bhd’s (KLK) pro­posed takeover of UK-based plan­ta­tion com­pany M.P. Evans Group Plc as an op­por­tune one for it.

KLK yes­ter­day closed 0.17% lower at RM24.20 per share with 724,700 shares traded.

The of­fer price of 640 pence (RM3.25), which is val­ued at en­ter­prise value of RM52,865 per planted hectare, is 51% higher to the pre­vi­ous clos­ing price of 426.25 pence a share. It is also 38% higher com­pared with the com­pany’s lat­est net as­set value of US$334 mil­lion (RM1.39 bil­lion) and an up­side of 5% from the con­sen­sus tar­get price.

“We think that it is a timely en­try for KLK con­sid­er­ing the weak pound cur­rency, which has dropped more than 20% year to date. It is also a good op­por­tu­nity for MP Evans’ ex­ist­ing share­hold­ers to exit given the low liq­uid­ity in the com­pany’s share trad­ing,” PublicIn­vest said in a re­port yes­ter­day.

The re­search house said the re­cent crude palm oil price rally cou­pled with its young age pro­file and po­ten­tial prop­erty value in Malaysia also jus­tify the de­ci­sion for KLK to ac­quire MP Evans.

“The ac­qui­si­tion will ex­pand KLK’s planted area in In­done­sia by 19% to 163,762ha and help lower its ex­ist­ing age pro­file,” said PublicIn­vest.

The MP Evans board has re­jected the of­fer, cit­ing it as wholly in­ad­e­quate and sub­stan­tially un­der­val­ues the com­pany.

RHB Re­search In­sti­tute said while it ex­pects earn­ings ac­cre­tion to be min­i­mal in the be­gin­ning (45% for FY17), it ex­pects this to im­prove as the trees age and new ar­eas come into ma­tu­rity.

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