Boustead plummets after LTAT aborted privatisation bid

TheEdge Wed, Feb 03, 2021 11:59am - 3 months ago

KUALA LUMPUR (Feb 3): Boustead Holdings Bhd’s share price lost support this morning, plunging as much as 19.7% or 14 sen to a low of 57 sen, on news that its controlling shareholder Lembaga Tabung Angkatan Tentera (LTAT) had decided to abort the privatisation plan. 

The selling has reversed its recent rally that lifted the conglomerate’s share price to six month high of 76 sen last week. 

The decision came eight months after LTAT had first revealed its intention to take the debt-laden conglomerate private in May last year at the peak of the first wave of Covid-19 pandemic. The arm forces fund had then placed an indicative takeover price of 80 sen per share but it had cautioned that the announcement of its intention did not mean the privatisation would materialise. 

The selling this morning is not surprising as some analysts view that the expectation of privatisation exercise had been the main support to Boustead’s share price since the news broke then. 

As at 11.40am, Boustead shares were trading at 60 sen, down 11 sen or 15.5%, valuing the conglomerate at RM1.21 billion. Trading volume swelled to 26.8 million shares, sharply higher compared with its 200-day average trading volume of 9.46 million shares. It is the 19th mostly traded counter on Bursa Malaysia this morning. 

To recap, the armed forces fund announced that it was not pursuing the privatisation of Boustead after taking into account the challenging economic environment stemming from Covid-19 and the reimposition of the Movement Control Order (MCO). Instead, the group will focus on its Reinventing Boustead strategy to rejuvenate the group.

The announcement came almost one week after LTAT told Boustead that “there has been no material development in respect of the proposal” (privatisation exercise last Wednesday (Jan 27). 

Yesterday was the final deadline set by the Securities Commission Malaysia for LTAT to decide whether it was going ahead with the privatisation exercise.

Boustead is the main dividend income contributor to LTAT. The conglomerate has been financially stressed in recent years and that has affected its affordability to declare generous dividends. 

Boustead has several listed entities under its belt, for instance it holds a 20.73% stake in Affin Bank Bhd, 57.42% stake in Boustead Plantations Bhd, 65% stake in Boustead Heavy Industries Corp Bhd and 56.09% stake in Pharmaniaga Bhd.

Earnings wise, for the nine months ended Sept 30,2020 (9MFY20), Boustead reported a wider net loss of RM153.1 million, from RM14.2 million a year prior. Revenue for the nine months was 6.16% higher at RM7.79 billion, from RM7.33 billion previously.

As of Sept 30, 2020 its borrowings stand at RM7.70 billion.

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