Independent Analyst

Niklas Olausson

Thematic (Sector/Industry)

<ul>
<li>The NOAA has confirmed that the world is at the start of an El Niño, which means less rainfall in Southeast Asia and pressure on oil palm yields.   </li>
<li>Early signs point to a severe event, which would cause a significant edible oil deficit in 2024. Ongoing drought in the U.S. is a budding wild card, affecting soybeans. </li>
<li>The report projects a 40% YoY higher average crude palm oil price in 2024. Given depressed consensus expectations and undemanding valuation, the risk-reward is bullish on a 6-12 month horizon. </li>
</ul>


The NOAA has confirmed that the world is at the start of an El Niño, which means less rainfall in Southeast Asia and pressure on oil palm yields.   
Early signs point to a severe event, which would cause a significant edible oil deficit in 2024. Ongoing drought in the U.S. is a budding wild card, affecting soybeans. 
The report projects a 40% YoY higher average crude palm oil price in 2024. Given depressed consensus expectations and undemanding valuation, the risk-reward is bullish on a 6-12 month horizon. 


Southeast Asia Plantations: El Niño’s Back, with a Vengeance?

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/boustead-plantations-bhd" target="_blank" data-smartkarma-citation="entities:11418:1" rel="noopener">Boustead Plantations (BPLANT MK)</a> shares have been on a rollercoaster ride. As <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> pulls its offer, LTAT has emerged as an unlikely white knight. </li>
<li>LTAT aims to launch a general offer at RM1.55 per share, in line with KLK’s aborted MGO price. The government will backstop LTAT’s funding for the offer. </li>
<li>LTAT is vague on approvals and timing. Regulatory approvals should be a formality as LTAT is the Armed Forces pension fund. At the last close, the gross spread was 10.7%. </li>
</ul>



Boustead Plantations (BPLANT MK) shares have been on a rollercoaster ride. As Kuala Lumpur Kepong (KLK MK) pulls its offer, LTAT has emerged as an unlikely white knight. 
LTAT aims to launch a general offer at RM1.55 per share, in line with KLK’s aborted MGO price. The government will backstop LTAT’s funding for the offer. 
LTAT is vague on approvals and timing. Regulatory approvals should be a formality as LTAT is the Armed Forces pension fund. At the last close, the gross spread was 10.7%. 


Boustead Plantations (BPLANT MK): LTAT Emerges as a White Knight

<ul>
<li>
<a href="https://www.smartkarma.com/entities/boustead-plantations-bhd" target="_blank" data-smartkarma-citation="entities:11418:1" rel="noopener">Boustead Plantations (BPLANT MK)</a> shares are down 16%, resulting in proprietary day trading and intraday short selling being suspended. The transaction is mired in political debate. </li>
<li>The bull case is that <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> continues on-market purchases and the opposition will compromise, paving the way for deal completion. Timing is the key risk. </li>
<li>The bear case is a deal break. The downside is limited as the government will need another buyer, the shares trade below the undisturbed price, and the undemanding valuation. </li>
</ul>



Boustead Plantations (BPLANT MK) shares are down 16%, resulting in proprietary day trading and intraday short selling being suspended. The transaction is mired in political debate. 
The bull case is that Kuala Lumpur Kepong (KLK MK) continues on-market purchases and the opposition will compromise, paving the way for deal completion. Timing is the key risk. 
The bear case is a deal break. The downside is limited as the government will need another buyer, the shares trade below the undisturbed price, and the undemanding valuation. 


Boustead Plantations (BPLANT MK): A Transaction Mired in Political Debate

<ul>
<li>
<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> will acquire 33.00% of <a href="https://www.smartkarma.com/entities/boustead-plantations-bhd" target="_blank" data-smartkarma-citation="entities:11418:1" rel="noopener">Boustead Plantations (BPLANT MK)</a>'s outstanding shares from Boustead Holdings/BHB at RM1.55 per share. The purchase is conditional on BHB shareholder approval.</li>
<li>Once the purchase becomes unconditional, the joint offerors (KLK, BHB, LTAT) will be required to launch an MGO at RM1.55 per share, a 13.1% premium to the last close. </li>
<li>The MGO will have no minimum acceptance condition. The offer is attractive and represents an all-time high. The MGO is expected to be complete in 4Q23.</li>
</ul>



Kuala Lumpur Kepong (KLK MK) will acquire 33.00% of Boustead Plantations (BPLANT MK)'s outstanding shares from Boustead Holdings/BHB at RM1.55 per share. The purchase is conditional on BHB shareholder approval.
Once the purchase becomes unconditional, the joint offerors (KLK, BHB, LTAT) will be required to launch an MGO at RM1.55 per share, a 13.1% premium to the last close. 
The MGO will have no minimum acceptance condition. The offer is attractive and represents an all-time high. The MGO is expected to be complete in 4Q23.


Boustead Plantations (BPLANT MK): Pre-Conditional MGO at RM1.55

<ul>
<li>The El Nino is progressing, albeit slowly, in a volatile fashion. There is no significant impact yet on Southeast Asia's oil palm areas although YTD, rainfall is already lower YoY. </li>
<li>For edible oils, heat waves and drought continue to underpin elevated yield risks, with current focus on soybeans (U.S. and China), rapeseed (Canada) and olive oil (the Mediterranean.) </li>
<li>The Plantation sector and CPO price have gained some traction, but it is early days. Maintain a bullish stance. Report contains new data on earnings mixes, maturity profiles and yields.   </li>
</ul>


The El Nino is progressing, albeit slowly, in a volatile fashion. There is no significant impact yet on Southeast Asia's oil palm areas although YTD, rainfall is already lower YoY. 
For edible oils, heat waves and drought continue to underpin elevated yield risks, with current focus on soybeans (U.S. and China), rapeseed (Canada) and olive oil (the Mediterranean.) 
The Plantation sector and CPO price have gained some traction, but it is early days. Maintain a bullish stance. Report contains new data on earnings mixes, maturity profiles and yields.   


Southeast Asia Plantations: Where Things Stand with the Weather, Still Bullish

Malaysia

Hap Seng Plantations Holdings Berhad cultivates oil palm and processes fresh fruit bunches. The Company operates and manages their plantations and mills as well as the infrastructure to store and transport crude palm oil and palm kernel.

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Hap Seng Plantations Hldgs (HAPL MK)

Southeast Asia Plantations: El Niño’s Back, with a Vengeance?

The El Niño is back and is likely to evolve into a severe event, resulting in significant oil palm yield compression. Plantations are cheap, even...

Niklas Olausson

Boustead Plantations (BPLANT MK): LTAT Emerges as a White Knight

On 10 November, LTAT entered into an unconditional share sale agreement with BHB to acquire its 33% BPlant stake at RM1.55 per share. This will...

Arun George

Boustead Plantations (BPLANT MK): A Transaction Mired in Political Debate

Predicting the outcome of a political debate is tricky—the price decline points to new deal hurdles. The shares are 11% below the undisturbed...

Arun George

Boustead Plantations (BPLANT MK): Pre-Conditional MGO at RM1.55

The MGO will have no minimum acceptance condition. The offer is attractive and represents an all-time high. The MGO is expected to be complete in...

Arun George

Southeast Asia Plantations: Where Things Stand with the Weather, Still Bullish

The El Nino is progressing slowly, but for edible oils, heat waves around the world continue to elevate near-term yield risks. Maintain bullish...

Niklas Olausson

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