By Jithendra Antonio
While the Carson group had recently made a voluntary mandatory offer to buy minority shareholdings of highly valued Malaysian plantations at the Colombo Stock Exchange, an Independent Advisor report by CT Capital had outlined that the offer consideration of Carson shares and Bukit Darah is attractive for shareholders of Indo Malay PLC (INDO).
The Independent Advisor report further said the liquidity of INDO is poised to dry up further, after the closure of the offer, and illiquid shares have been subject to extreme price volatility in the Colombo Stock Exchange in recent times.
The report further noted, subsequent to a voluntary offer to the shareholders of Indo Malay PLC (INDO) by offerors Bukit Darah PLC (BUKI) and Carson Cumberbatch PLC (CARS), shareholders of INDO have been offered 0.71 shares of BUKI and 0.86 shares of CARS for one share of INDO, based on the current share prices of BUKI and CARS.
The Independent Advisor report also said, based on the current share price of BUKI and CARS, the market value of the consideration as at 18 March 2011 was Rs.1406.21, which is a 14.79 percent premium to the current share price of INDO.
“Using several valuation methodologies, directors of INDO also derived fair value estimates for the shares of Indo Malay PLC, where valuations (in all instances) have been lower than the current market value of the offer consideration, in which current share price stands at Rs.1,225 (14.79% discounted to offer)” the report said.
“Based on the above, it is our opinion that the offer consideration is attractive for shareholders of INDO with typical risk profile and average investments horizons” the report said.
Carson group recently informed its decision to buy minority stakes in its four Malaysian Oil Palm subsidiaries including, Shalimar (Malay) (SHAL), Good Hope (GOOD), Indo-Malay (INDO) and Selinsing (SELI), and de-list them from the Colombo Stock Exchange. In return, it has promised shares in Carson Cumberbatch (CARS) and Bukit Darah (BUKI).
The director board of INDO in a separate statement endorsing the report by the Independent Advisor told the company’s shareholders that the offerors’ consideration of CARS and BUKI shares are significantly more liquid and more marketable than the shares of INDO, providing a more diversified income stream as opposed to INDO.
Given INDO’s relatively small scale and stand-alone nature, it is unable to raise the amount of funds needed for large scale plantation project expansions, and form effective joint ventures or strategic alliances, the statement emphasized.
“CARS and BUKI however, with a significant larger plantation assets base, do not face such constraints.
The growth potential of the offerors is thus superior to that of the offeree, wherein the small scale inhibits economies of scale and synergies.” the statement said.
Furthermore, the directors are also of the view that each individual shareholder would have to make a decision based on his her own assessment of the voluntary offer.
According to the statement, the controlling shareholder has also noted the rationale for INDO’s listed post offer closure would be assessed, and has indicated that it is likely INDO would consider delisting, subject to receiving the expected level of acceptance.
Although Carsons said the ownership of group company shares will enable shareholders to reduce the risk and volatility of plantation returns, as per financial results for the nine months ended in 31 December 2010, the oil palm plantations of Carson’s group had been the major contributor to company’s revenue since 2009, amounting to almost 50% of group’s revenue and over 60% of company’s profits for the first nine months of 2009 and 2010.
In 2009 alone, oil palms had brought revenue amounting to Rs.8.6 billion for Carson, out of a total revenue of Rs. 19.6 billion, while oil palm net profit has been reported at Rs.3.2 billion out of Rs.4.7 billion profits of the group. In 2010, oil palms had brought in revenue of Rs.15.3 billion out of a total Rs.29.9 billion, while oil palm net profit had added Rs.4.3 billion to Rs.6.4 billion to the group’s net profit during the first nine months.
Further restructuring
Ceylon Invetment Plc, a unit of Carson Cumberbatch & Company has transferred 41, 600, 000 ordinary shares it held in Expolanka Holdings, to another Carson subsidiary, Guardian Capital Partners (formerly known as Watapota Investments).
The transferred shares amount to 2.34 percent of Expolanka’s shares in issue. The company is expected to come up with an Initial Public Offering shortly. According to Carson, the rationale behind the share transferring worth of Rs.249, 600, 000 was to restructure private equity investments, under Guardian Group’s private equity investment company, as planned originally.
source - www.dailymirror.lk
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