AmWatch - Sime Darby : Bidding for NBPOL? BUY, 16 Jun 2014

STOCK FOCUS OF THE DAY

Sime Darby : Bidding for NBPOL?              BUY

Sime Darby has entered the fray to bid for a stake in London-listed New Britain Palm Oil Ltd (NBPOL), which is majority-owned by Kulim (M) Bhd, according to a Starbiz report. The other interested bidders are Felda Global Ventures Holdings Bhd (FGV) and the Sultan of Johor, who is reportedly teaming up with a Singapore-listed China entity.

According to the report, the concern now is that it would turn into a bidding war and valuations may go as high as £6 (RM26.2) per share. NBPOL was last traded at £3.95/share (RM21.6/share), translating into a market cap of £593mil (RM3.2bil).  NBPOL owns 77,000ha of oil palm plantations in PNG and the Solomon Islands, 12 palm oil mills and one refinery each in PNG and Liverpool.

The group is also the largest domestic sugar and beef producer in PNG via its 7,700ha sugar cane plantations and 9,200ha of grazing pastures as well as a seed production and palm breeding facility. NBPOL is 48.97% owned by Kulim, which in turn is a subsidiary of Johor Corp (JCorp). The West New Britain Provincial Government is the second largest shareholder, with an 8%.

According to the report, Kulim had last year failed in its bid to raise its stake in NBPOL by 20% to 68.97% via a partial GO at £5.50 (RM27.47) per share.  Kulim’s bid had failed mainly because the Securities Commission of PNG had imposed a restraining order against the move that it had viewed as against “national interest”.

NBPOL’s management had opposed the deal, while the independent adviser argued that it was neither fair nor reasonable and significantly undervalued NBPOL. It reportedly said the fair value was estimated at between £6.50-£7/share. We are neutral on this latest development. We maintain our BUY call for Sime Darby, with a fair value of RM11.20/share – a 10% discount to our SOP value of RM12.45/share.

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