GNEALY (FV RM8.02 - BUY) Corporate News Flash: Privatization Offer Firm

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD

Research House: OSK

Price Call: BUY

Target Price: 8.02

THE BUZZ

In line with Samling Strategic Corporation (SSC)'s bid toprivatize Hong Kong-listed Samling Global Limited (SGL), SGL has made a formaloffer to privatize Glenealy Plantations and timber player Lingui Developmentsat an offer price of RM7.50 and RM1.63 per share respectively.

OUR TAKE

Same old deal. On27 Jan 2012, SSC, a  private   company of  Tan  Sri Yaw  Teck  Seng, indicated  its interest  in privatizing the three companies, including Glenealy  at  an  indicative offer  price  of RM7.50  per  share. The confirmed bid values the companyat the same price, translating into a PER of 11.2x CY12 EPS, PBV of 1.3x CY12 NTA and EV/EBITDA of 4.7x CY12EBITDA. SSC currently holds an effective stake of 53.7% in Glenealy aftercombining Lingui's 38.3% stake and SSC's own direct stake of 15.4%. At theoffer price, SGL will have to fork out RM396.3m to acquire the entire remaining46.3% stake not under SSC's effective control. The offer values Glenealy at amarket capitalization of RM865.2m and an enterprise value of just RM765.2m,after taking into consideration the firm's considerable cash pile of RM166.1m.

Not enough. Westand by our view that the RM7.50 offer undervalues Glenealy both on a PER andenterprise value per ha (EV per ha) basis. The disparity against comparables ismost drastic from an EV-per-ha point of view, with the deal pricing Glenealy atjust USD8,250 EV per planted ha for its 30,127 ha planted area in Sabah,Sarawak and Indonesia. This represents a 50% discount when compared to thesector average of about USD16,500 EV per ha. On a PER standpoint, the 11.2xCY12 EPS price tag placed on Glenealy comes at a 18.9% discount relative toregional sector peers and a 21.2% discount versus other Malaysian plantersunder our coverage. While a discount is justifiable given the company's smallersize and stock illiquidity, we think the 50% and 19% discount to EV per ha andPER are unwarranted, considering that Glenealy's planted area size is similarto that of TSH Resources.

Don't take the offer.We advise shareholders not to take up the RM7.50 offer until SSC garnersapproval for the deal from at least 75% of the minority shareholders which is equivalent to a 34.7% stake. Thecompany's third largest shareholder is Perkapalan Damai Timur SB with a 11.4%stake, a shareholder which management has previously said was not related tothe Samling Group. Should the entity turn out to be a friendly party, SSC will  only need to  deal with 34.9% ofnon-related / friendly shareholders for the proposal.

Source: OSK188

Production Growth Tapers Off

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD

Research House: OSK

Price Call: BUY

Target Price: 8.02

Up for Privatization

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD

Research House: OSK

Price Call: BUY

Target Price: 8.23

Glenealy Plantations still a bargain

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD

Research House: OSK

Price Call: BUY

Target Price: 7.25

Glenealy Plantations (Malaya) Bhd
(Nov 3, RM5.80)
Maintain buy with fair value RM7.25: Glenealy registered strong year-on-year (y-o-y) growth both at the top and bottom line, although this performance was slightly weaker on a sequential basis amid declining crude palm oil prices and fresh fruit bunch (FFB) production.

The company's earnings and production came in within expectations, with FFB production rising by a healthy 12.8% y-o-y. The stock remains cheap, especially in terms of enterprise value (EV) per planted ha, being the least expensive among plantation companies within our coverage from this viewpoint. Maintain 'buy' with a fair value of RM7.25.

Glenealy's 1QFY12 earnings made up 27.3% of our full-year FY12 forecast, soaring by 156.5% y-o-y but rising at a softer 1% sequentially. Revenue surged 68.2% y-o-y but declined by 6.7% quarter-on-quarter (q-o-q) despite the positive sequential CPO sales volume growth as the company's realised prices fell 6.7%.
As FFB production had historically skewed towards 1HFY12, our expectations of CPO prices weakening in 2HFY12 should see Glenealy's earnings in the second half account for less than half of our full-year earnings estimates. Our current projected FY12 average CPO price is RM2,950 per tonne, lower than the RM3,107 achieved so far.

Glenealy's FFB production slipped 2.9% q-o-q after experiencing a strong 20.1% sequential growth in the previous quarter. Nonetheless, production rose 12.8% on a y-o-y basis, which is in line with our 10.9% growth estimate.

Even though production is entering a traditional upcycle, the q-o-q decline may have been partly due to the month of Ramadan in August, during which the availability of labour for harvesting was somewhat affected. Some 60% of the company's FFB comes from Sabah, where production could have been hit by the tail-end effects of the drought in 1QCY10.

We are keeping our FY12 and FY13 forecasts unchanged. Glenealy's share price has been well supported despite the current economic headwinds, partially owing to its low beta and dry trading volume. Along with its strong balance sheet and cheap EV per planted ha of US$5,800 (RM18,270), we maintain our 'buy' call, with a fair value of RM7.25, based on 12 times FY12 price-earnings ratio. ' OSK Research, Nov 3


This article appeared in The Edge Financial Daily, November 4, 2011.

GNEALY - Glenealy Plantations shows signs of production recovery

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD
Research House: OSK

Glenealy Plantations (Malaya) Bhd
(May 18, RM5.27)
Maintain buy at RM5.10 with revised target price of RM6.40 (from RM6.05): Glenealy's 9MFY11 core earnings surged 91.2% year-on-year (y-o-y) to RM53 million, representing 87.1% of our full-year forecast. Earnings before interest, tax, depreciation and amortisation (Ebitda) rose 59.8% while profit before tax leaped by 89.3%.

Ebitda margins were much stronger at 60.9% from last year's 46.7% due to sharply higher palm oil prices and lower expenses. Revenue was up by 22.7% to RM181.8 million and accounts for 72.2% of our revenue forecast, which we consider in line. Deviation from our earnings estimates came from lower than expected cost of sales and operating expenses, which decreased 5.5% y-o-y despite the higher revenue. We had initially expected costs to rise 7.1%. We will seek further clarification from management on the matter.

Glenealy's 9MFY11 fresh fruit bunches (FFB) production was down 2.6% y-o-y, in line with our full-year estimates for a 2.2% decrease. Crude palm oil (CPO) production decreased by 10.8%.

The company has, however, shown signs of a recovery in production in the past few months. In 3QFY11, FFB production was up 4% y-o-y after a poor 2QFY11 when production dropped by 14.9% y-o-y. For February and March 2011 combined, FFB production was clearly stronger y-o-y, higher by 17.8%.

We trim down our cost assumptions for both FY11 and FY12, thus increasing our FY11 earnings forecast by 12.2% to RM68.3 million from RM60.9 million previously. Our FY12 earnings forecast is raised by 7.2% to RM61.7 million from RM57.6 million. Pegged at 12 times FY12 earnings per share, we maintain our 'buy' call and have a revised fair value of RM6.40 for the stock.

The stock is currently trading at 9.5 times FY12 EPS and US$5,850 (RM17,667) earned value per hectare. ' OSK Research, May 18


This article appeared in The Edge Financial Daily, May 19, 2011.

GNEALY - OSK rates Glenealy a 'buy'

Stock Name: GNEALY
Company Name: GLENEALY PLANTATIONS (M) BHD
Research House: OSK

Glenealy Plantations (Malaya) Bhd is bound to see strong production growth at least for the next few years, in view of its young age profile and further expansion plans in Indonesia, says OSK Research.

"We are initiating coverage on Glenealy with a 'buy' rating and a 12 months fair value of RM6.05," the research firm said in note today.

Glenealy has a planted area of 28,537 hectares in Sabah and Sarawak and its trees are largely young, with 51 per cent at or younger than five years, based on June 30, 2010 figures.

The research firm said 60 per cent of the company's trees are below peak production age, so there is ample room for fresh fruit bunch (FFB) production growth moving forward.

Glenealy currently has about 11,000 hectares of plantable area in Kalimantan Timur, of which about 2,000-3,000 hectares will be planted annually.

Together with another 2,000-3,000 hectares annual planting in Sarawak, it will bring the company's planted area expansion to about 4,000-6,000 hectares per annum.

This,OSK said, will fuel planted area growth by 15-22 per cent for this financial year and by 13-18 per cent for the next.

"We estimate Glenealy to register double-digit FFB production growth of between 11-15 per cent in financial year 2012-2013," it added.

OSK said should the company plant at a more aggressive 6,000 hectares annual rate, it expects the financial year 2014-2016 FFB production CAGR to be 10 per cent.

It said production will remain stagnant starting in 2014 if the company chooses not to expand its existing planted area (zero new planting).

Glenealy has recorded steady production growth for the past decade, rising from 207,334 tonnes in 2001 to 316,667 tonnes in 2010, which represents a five per cent CAGR. -- Bernama