Glenealy Plantations - Shareholders Give The Thumbs-up

THE BUZZ  

Samling’s  RM7.50  per  share  offer  to  privatise  Glenealy  was  approved  by  the  latter’s
minority shareholders during a court-convened meeting yesterday.

OUR TAKE  

Acceptance  levels.  85.3%  of  total  voting  shareholders  were  in  favour  of  the  RM7.50 per  share  privatisation  offer,  while  the  remaining  14.7%  were  still  dissatisfied  with  the tabled  bid.  It  appears  that  the  unhappy  minority  shareholders  hold  a  smaller  portion  of the shares outstanding, however, as the 85.3% of total shareholders who voted ‘yes’ in combination  represented  94.2%  of  the  minority  shares  that  voted.  The  disgruntled shareholders  accounted  for  5.8%  of  the  minority  shares  voted,  4.2%  of  total  minority shares  and  2.0%  of  total  outstanding  shares.  However,  the  figures  suggest  that  there were 27.4% of minority shares that either was not present, did not have a proxy or chose to abstain from voting.

Valuations.  Including  the  RM0.5275  per  share  special  dividend  declared  on  11  Sept, the implied enhanced offer would value Glenealy’s shares at 14.7x FY12 (the FY ended on  June),  11.9x  FY13  and  10.5x  FY14  PEs.  These  are  generally  fair  for  a  plantation company of its size and stock illiquidity. With the company’s 30,693 ha of planted land in Borneo, the additional dividend on top of the existing offer price would place Glenealy’s estates at USD9,250 per ha (RM28,570 per ha), which still represents a 22.9% discount to the recently transacted Indonesian brownfield land price of approximately USD12,000 per ha. We found the offer fair on a PER basis but still cheap on an EV per ha basis.

Adjusted  FV. We  reduce  our  FV  from  RM8.57  to  RM8.10  following  the  acceptance  of the  privatisation  offer,  representing  a  5.5%  downward  adjustment.  Our  FV  of  RM8.10 reflects  the  RM7.50  privatisation  offer  and  outstanding  net  dividends  of  RM0.60  per share.  RM0.0725  of  the  RM0.60  dividends  will  go  ex  on  19  Sept.  With  a  mere  1.9% remaining  to  our  FV,  we  downgrade  Glenealy  to  NEUTRAL.  The  stock  has  given  us  a return  of  56.8%  since  our  initiation  16  months  ago.  We  will  cease  coverage  once  the deal is complete.

Source: OSK