Pinehill Pacific Bhd (Rm0.54) - Part II

From the 5-minute interval chart, on the second day after its announcement to sell its 8,999 acres of oil palm plantation in Perak to United Plantation Bhd (UPB) for about Rm413 million, from its Friday's limit-up price of 44 sens, its price opened with a gap and moved to a high of 69 sens followed by sharp drop to 53 sens before moving side way and closed at 54 sens. Volume traded is very high at 29.75 million, which is 19.8% of its total number of shares of 150 million.

At its closing price of 54 sens, its total market capitalization is Rm0.54x150m = Rm81 millions. This figure is far lower than the proposed price of Rm413 millions by UPH to buy the 8,999 acres of land.

The major shareholder of Pinepac is Tan Sri (Dr) Ketheeswaran with 22.78% indirect interest and 9.55% direct interest. The shareholding of the next 5 major shareholders are 3.87%, 2.47%, 2.4%, 2.2% and 1.9%, totaled 12.84%. I can safely say that more than 60% of the shares are in the hand of the minority shareholders plus free float held by other investors.

It appeared to me that it is possible for UPB to buy up to 33% of Pinepac share from the open market for a price of 54 sens a share to Rm1.00 a share to trigger a mandatory general offer. Even at Rm1.00, it will cost UPB less than Rm150 millions to takeover Pinepac with its 8,999 acres of land in Malaysia and another 51,400 acres of land in Indonesia. Not forgetting 22,192 acre out of 51,400 has been planted with oil palm and 22,100 acres are matured oil palm area.

At the worst, if UPB is willing to pay RM413 millions for 8,999 acres, why not used the Rm413 millions to buy up 150 millions of pinepac shares, that is Rm2.75 a share for 8,999 acres in Perak plus another 51,400 acres that has 22,100 acres of matured oil palm area in Indonesia.

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