Boustead Heavy shares spike on privatisation talk

Rumour is that Boustead Heavy Industries will be taken
private at above RM5 a share and it may happen soon, sometime this
quarter, says a broker



Kuala Lumpur: Boustead Heavy Industries Corp Bhd (BHIC) shares
rose for the second straight day, posting its highest single-day gain in
a more than a week, driven by renewed speculation that its largest
shareholder Armed Forces Pension Fund or Lembaga Tabung Angkatan Tentera
(LTAT) will take the company private soon.

“Rumour is that the
BHIC will be taken private at above RM5 a share. Market is speculating
that it may happen soon, sometime this quarter,” said a broker.

BHIC shares rose 6.35 per cent to RM3.85 yesterday.
Some 1.2 million shares changed hands yesterday, more than double its average trading volume over the past 30 days.

At RM3.85 a share, it was also BHIC’s highest closing since July 2011.






At press time, LTAT and BHIC did not respond to Business Times e-mail queries.

Two
weeks ago, Tan Sri Lodin Wok Kamaruddin, who is LTAT chief executive
officer, did not dismiss the prospect of LTAT privatising BHIC.

“We
can’t comment on what LTAT is going to do about BHIC,” said Lodin.
“That you would have to ask LTAT. It is for LTAT’s board of directors to
collectively deliberate upon.”

LTAT owns more than 73 per cent
of BHIC directly and indirectly. It has a direct stake of 8.15 per cent
in BHIC and another 65 per cent indirect stake in the company.

BHIC’s
share price is believed to be the worst performer in LTAT’s investment
portfolio of listed companies in 2011, which include Boustead Holdings
Bhd and Affin Holdings Bhd.

Last year, BHIC shares fell by about
20 per cent. In contrast, Affin Holdings shares stayed stagnant and
Boustead Holdings shares rose 7 per cent.

BHIC’s earnings also took a big hit for the most part of last year.
For
the nine months ended September 30 2011, it posted a 84 per cent drop
on net profit of RM9 million and revenue declined by 8 per cent to RM387
million.

While one may be puzzled as to why LTAT may choose to
privatise BHIC at a premium, analysts said the temptation to privatise
BHIC could be driven by the jobs it is expected to secure over the
medium- to long-term.

BHIC earnings’ visibility looked secure for
the next 10 years after it was awarded a RM9 billion Defence Ministry
contract to design build and deliver six second-generation patrol
vessels.

"I wouldn't be surprised if LTAT decides to privatise
BHIC. Its shares and earnings have been extremely volatile as earnings
are mainly project-driven.

"So, if LTAT does not want to have
shocks to the value of the company, privatisation is understandable,"
said Jupiter Securities head of research Pong Teng Siew.

Should LTAT take BHIC private for RM6 a share like what the market is speculating, it would cost LTAT about RM360 million.

At RM6, it would also translate to more than three times of its book value of RM1.70 a share as at end September 2011.

As at end 2010, LTAT recorded its highest audited profit of RM751.5
million, an increase of 44.6 per cent from RM519.8 million in 2009.

At the group level, LTAT Group reported a profit before tax and zakat
of RM1.7 billion, a rise of 38.8 per cent from RM1.2 billion a year ago.