Is the value of planatation companies in its assets or its earnings?  The acquistion by KLK suggests that it is in the assets. I have a valuation of BPlant here. 

How to ensure you are realistic when analysing plantation companies

I do a lot of fundamental analysis and to ensure that I am not carried away by optimistic or even pessimistic thinking, I follow Daniel Kahneman’s inside and outside view, from his book “Thinking Fast and Slow”

The inside view generally refers to a conclusion reached using an individual own experience and reasoning.  It is the perspective of someone looking at the problem from “the inside”.  The focus is on the specific situation rather than looking at a broader class of similar situations.

In contrast, the outside view refers to the perspective of someone looking at the problem "from the outside". It is the view taking into consideration the actual experience of other people.

When you analyze a company, the inside view may lead to unrealistic expectations. To counter this, you need an outside view.

This is where base rates come in. The performance of the industry would give you a basis to check on your analysis and projections.

I have updated my base rates for the Bursa plantation sector as per my article “How the Malaysian plantation sector performed over the past 10 years” 

BPlant – I am accepting the offer as it is at a fantastic price.

I recently received the Offer Notification for my BPlant shares.

I bought the shares years ago and started selling in middle of the year when the share price started to go up.

At that juncture, I did not have any idea that it was going to be taken over by KLK. Anyway, by the time KLK announced the takeover at RM 1.55 per share, I already had sold off more than 90% of them. Yes, I left lots of money on the table.

Then came the termination of the sale and the subsequent offer by LTAT to buy the shares at the same price of RM 1.55 per share.

I am of course accepting the offer. It is not just because the offer price is above BPlant NTA or that the listing status would not be maintained.

It is because it is a fantastic price given the earnings power of BPlant.

If you look at the history of BPlant, a very significant part of the earnings was from land sale and not the plantation operations.

• From 2013 to 2020, the Group achieved RM 1.1 billion of PAT. Over this period the gain from the disposal of land and securities amounted to RM 1.2 billion. The plantation operations incurred cumulative losses for the period.

• Of the 2022 PBT of RM 729 million, RM 459 million came from asset sale.

Assuming a PE of 15, the company would have to generate an EPS of RM 0.10 per share yearly from the operations to justify the price.

Do you think that the company would be able to do so give the poor track record over the past 10 years. They will have to work very hard or find another buyer. I think we shareholders are very lucky to have this offer.

For my insights into BPlant refer to "Is BPlant one of the better Bursa Malaysia stocks?”