IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/kuala-lumpur-kepong-bhd" target="_blank" data-smartkarma-citation="entities:17039:1" rel="noopener">Kuala Lumpur Kepong (KLK MK)</a> made an offer to acquire <a href="https://www.smartkarma.com/entities/ijm-corp-bhd" target="_blank" data-smartkarma-citation="entities:16784:1" rel="noopener">Ijm Corp Bhd (IJM MK)</a>/IJMC’s entire stake in <a href="https://www.smartkarma.com/entities/ijm-plantations-bhd" target="_blank" data-smartkarma-citation="entities:12967:1" rel="noopener">Ijm Plantations (IJMP MK)</a>/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  <div class="content-highlight">A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  </div>

Kuala Lumpur Kepong (KLK MK) made an offer to acquire Ijm Corp Bhd (IJM MK)/IJMC’s entire stake in Ijm Plantations (IJMP MK)/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  

IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

The benchmark palm oil contract on the Malaysia Bursa closed at a record high of RM4,524/mt at the mid-day close the 12 May. The previous high was in March 2008. That gain in palm oil has moved in tandem with a rally in the vegetable oil complex, which has eked out the sharpest increase of all the agricultural commodities in the past year.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/206/666/original/image_83464541291621222454246.png?1621222454" class="editor-image img-responsive" data-smartkarma-image-id="206666"></figure>
<div style="text-align: left;" class="content-caption">Source: <a href="http://www.fao.org/faostat/en/#data/QD/metadata" target="_blank" rel="noopener">FAO</a>
</div>
<div style="text-align: left;" class="content-caption">Components of the vegetable oils price index: soybean oil, Dutch , fob ex-mill; sun oil, EU, fob NW Eur. port; rape oil, Dutch, fob ex-mill; groundnut oil, any origin, cif Rotterdam; cotton oil, US, PBSY, fob Gulf; coconut oil, Phil./Indo., cif Rotterdam; palmkernel oil, Mal./Indo., cif Rotterdam; palm oil crude, cif NW Eur. port; linseed oil, any origin, ex-tank, Rotterdam; castor oil, ex-tank Rotterdam.</div>
The gain in palm oil prices is largely underpinned by concerns over slower-than-expected production growth in the key exporting countries (Malaysia and Indonesia), hampered by labour shortages, in conjunction with strong global import purchases.
Yet while palm oil has enjoyed a meteoric price rise, the performance of listed palm oil plays has bifurcated. 
Is this rally sustainable and why are markets not moving more in sync?  Or is ESG becoming a more pressing issue? 
More below the fold. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/206/657/original/image?1621220074" class="editor-image img-responsive" data-smartkarma-image-id="206657"></figure>

 The benchmark palm oil contract on the Malaysia Bursa closed at a record high of RM4,524/mt at the mid-day close the 12 May. The previous high was in March 2008. That gain in palm oil has moved in tandem with a rally in the vegetable oil complex, which has eked out the sharpest increase of all the agricultural commodities in the past year.

Source: FAO

Components of the vegetable oils price index: soybean oil, Dutch , fob ex-mill; sun oil, EU, fob NW Eur. port; rape oil, Dutch, fob ex-mill; groundnut oil, any origin, cif Rotterdam; cotton oil, US, PBSY, fob Gulf; coconut oil, Phil./Indo., cif Rotterdam; palmkernel oil, Mal./Indo., cif Rotterdam; palm oil crude, cif NW Eur. port; linseed oil, any origin, ex-tank, Rotterdam; castor oil, ex-tank Rotterdam.
The gain in palm oil prices is largely underpinned by concerns over slower-than-expected production growth in the key exporting countries (Malaysia and Indonesia), hampered by labour shortages, in conjunction with strong global import purchases.
Yet while palm oil has enjoyed a meteoric price rise, the performance of listed palm oil plays has bifurcated. 
Is this rally sustainable and why are markets not moving more in sync?  Or is ESG becoming a more pressing issue? 
More below the fold. 


Powering Palm Oil: Record Prices Amid Vegetable Oil Complex Rally

Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Alpha Factors

INVESTMENT CONCLUSION: An improved outlook for CPO pricing should support the shares into the S$0.30s.  Pricing expectations have improved as a result of strong biodiesel demand outstripping low production.  CPO prices have jumped 33% from June, yet <a href="https://www.smartkarma.com/entities/golden-agri-resources-ltd" target="_blank" data-smartkarma-citation="entities:1142:1" rel="noopener">Golden Agri Resources (GGR SP)</a> shares are down 20% in the same period.

INVESTMENT CONCLUSION: An improved outlook for CPO pricing should support the shares into the S$0.30s.  Pricing expectations have improved as a result of strong biodiesel demand outstripping low production.  CPO prices have jumped 33% from June, yet Golden Agri Resources (GGR SP) shares are down 20% in the same period. 

Golden Agri: Pricing Up / Stock Down:  Trading Buy

INVESTMENT CONCLUSION: We recommend avoiding shares linked to the Indonesian plantation sector, like <a href="https://www.smartkarma.com/entities/golden-agri-resources-ltd" target="_blank" data-smartkarma-citation="entities:1142:1" rel="noopener">Golden Agri Resources (GGR SP)</a> and <a href="https://www.smartkarma.com/entities/wilmar-international-ltd" target="_blank" data-smartkarma-citation="entities:172:1" rel="noopener">Wilmar International (WIL SP)</a> until the risks associated with a recent spike in transboundary haze passes.  Over the past few days, there has been a sharp deterioration in air pollution throughout Southeast Asia as a result of an escalation of fire clearing activities across Sumatra and Kalimantan.

INVESTMENT CONCLUSION: We recommend avoiding shares linked to the Indonesian plantation sector, like Golden Agri Resources (GGR SP) and Wilmar International (WIL SP) until the risks associated with a recent spike in transboundary haze passes.  Over the past few days, there has been a sharp deterioration in air pollution throughout Southeast Asia as a result of an escalation of fire clearing activities across Sumatra and Kalimantan.  

Golden Agri & Wilmar – Avoid till the Smoke Clears

Eagle High Plantations Tbk PT / Equity Bottom-Up

INVESTMENT CONCLUSION: We recently met with the IR manager of <a href="https://www.smartkarma.com/entities/eagle-high-plantations-tbk-p" target="_blank" data-smartkarma-citation="entities:4421:1" rel="noopener">Eagle High Plantations Tbk P (BWPT IJ).</a> The company’s message called for a return to profitability in 2H19 driven by higher volumes and improved pricing.  For a stock trading near its 5-year low, this could represent an interesting call-option, however, we see deleveraging taking priority ahead of more shareholder-friendly actions like dividends or growing the business for shareholders.  We label this report as 'Bullish' given that our 12-month price target of Rp.140/sh offers 16% upside.  However, for many investors we expect this risk-adjusted potential return to be too low to tempt them off the sidelines at the moment.

INVESTMENT CONCLUSION: We recently met with the IR manager of Eagle High Plantations Tbk P (BWPT IJ). The company’s message called for a return to profitability in 2H19 driven by higher volumes and improved pricing.  For a stock trading near its 5-year low, this could represent an interesting call-option, however, we see deleveraging taking priority ahead of more shareholder-friendly actions like dividends or growing the business for shareholders.  We label this report as 'Bullish' given that our 12-month price target of Rp.140/sh offers 16% upside.  However, for many investors we expect this risk-adjusted potential return to be too low to tempt them off the sidelines at the moment. 

Eagle High Plantations: ‘A Return to Profits’…but Deleveraging to Be Prioritised

Singapore

Established in 1992 and listed on the Singapore Exchange since 2007, First Resources is one of the leading palm oil producers in the region, managing over 200,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia.

Our core business activities include cultivating oil palms, harvesting the fresh fruit bunches (FFB) and milling them into crude palm oil (CPO) and palm kernel (PK). In addition to plantations and palm oil mills, the Group through its refinery, fractionation, biodiesel and kernel crushing plants, processes its CPO and PK production into higher value palm-based products such as biodiesel, refined, bleached and deodorised (RBD) olein and RBD stearin, palm kernel oil and palm kernel expeller. This enables the Group to extract maximum value out of our upstream plantation assets. Our products are sold to both local and international markets.

First Resources is committed to the production of sustainable palm oil. Our sustainability strategy is centred upon maximising output while minimising the adverse environmental and social impact from our operations. We will constantly strengthen our sustainability framework through regular benchmarking against industry standards and best practices.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

First Resources (FR SP)

IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

KLK MK made an offer to acquire IJMC’s entire stake in IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. If the SPA...

Arun George

Powering Palm Oil: Record Prices Amid Vegetable Oil Complex Rally

The gain in palm oil prices is largely underpinned by concerns over slower-than-expected production growth, in conjunction with strong global...

David Blennerhassett

Golden Agri: Pricing Up / Stock Down: Trading Buy

INVESTMENT CONCLUSION: An improved outlook for CPO pricing should support the shares into the S$0.30s. Pricing expectations have improved as a...

Charles Spencer

Golden Agri & Wilmar – Avoid till the Smoke Clears

INVESTMENT CONCLUSION: We recommend avoiding shares linked to the Indonesian plantation sector, like Golden Agri Resources (GGR SP) and Wilmar...

Charles Spencer

Eagle High Plantations: ‘A Return to Profits’…but Deleveraging to Be Prioritised

INVESTMENT CONCLUSION: We recently met with the IR manager of Eagle High Plantations Tbk P (BWPT IJ). The company’s message called for a return to...

Charles Spencer

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)