Anglo-eastern Plantations Share Discussion Threads

[skanjete2] 24/6/2024 14:05

TigerByTheTail : my thoughts exactly.

[tigerbythetail] 24/6/2024 11:37

AGM update as dry as dust - nothing but bare facts.
It occurs to me that the board are keeping their heads down and marking time until the dispute over Mme Lim's will is resolved, and it becomes clear who AEP's new major shareholder will be.
If I'm right, that's disappointing, of course, and it shows the current directors basic unfitness for office. But that's how it is. And why this company's share price is so wildly out of kilter with its peers.

[34adsaddsa] 23/6/2024 18:22

Again, that has all been true for years.

I doubt there will be any meaningful capital return until they run out of places to invest in the business or accept a takeover offer.

I'd like to be wrong.

[beresford99] 18/6/2024 16:36

Is there a chance that there could be an announcement at the AGM next week that could have a positive effect on the share price ?. MPE have just announced a new share buyback, just when AEP are stopping theirs due to “illiquidity” nonsense, they’ve known all along the share trading is illiquid … I call their actions at worst dishonest, at best misleading. When a company announces a share buyback program they are conveying faith in the company and a belief that the share price is undervalued…. do they now think the share is fairly valued ? They should be buying at least 5,000 shares every day.

[skanjete2] 17/6/2024 14:39

At current CPO prices, they should be able to generate about $80m.
Say 25$m for capital investment and a $12-15m of dividends.

That would leave them with $40m extra cash this year, on top of the investments + cash of 177$m at year end.

So net cash should be above $200m net cash, possibly about $215m, or about 4£/share.

So you pay about 2,65£/sh for earnings of say 1,25£/sh, good for a P/E of about... 2 ?

This situation can't possibly last forever.
In three years the complete marketcap would consist of cash on the bank.

[34adsaddsa] 14/6/2024 16:51

Yes. That has been true for years.

[chillpill] 14/6/2024 07:11

If this company were run with the same discipline as MPE the shares would be double the price imo.

[34adsaddsa] 31/5/2024 00:01

But it's down $16.4M since the start of the year, that's the drop I'm interested in. It could just be due to timing of investments, working capital etc.

[forensic] 30/5/2024 17:42

"The significant reduction in cash was principally due to the consolidation of AEP's holding in Indonesian subsidiaries by purchasing minority interests in late 2023 and allocating funds into investments for better yield."

All good

[34adsaddsa] 30/5/2024 07:16

Cash down. Presumably they've transferred more to investments for "better yield"..

[34adsaddsa] 20/5/2024 22:58

Yes, certainly a mess. I've read that article before. It seems unlikely to me that Madam Kim's AEP shares would just be left as part of the residuary estate but I can't find any mention that they've been specifically willed.

The article says assets worth 1.6 billion Malaysian Ringgits are in dispute. That's $342M dollars. Her AEP stake alone was probably worth $200M on her death so if her (indirectly owned) shares in AEP are in dispute then that is most the capital in dispute.

I think it's probably best for us if her AEP shares are distributed to as many parties as possible.

[tigerbythetail] 20/5/2024 19:55

This is the latest I can find about the disputed will. It looks like a real mess:
theedgemalaysia.com/node/667949

[skanjete2] 18/5/2024 12:18

Another thought about the well known issues between the heirs of Mme Lim :
These issues could indeed lead to indecisiveness of Genting and indirectely of AEP.

On the other hand, that creates 2 positives :
- more leeway for the BoD to act more independently from the majority shareholder
- a take-under becomes more unlikely : the warring parties at Genting will want a fair share, which increases the odds of a independent and correct valuation of AEP for a transaction.

[nobull] 18/5/2024 11:35

Thanks for your well made points. I am not sure that I would be racing around aged 73 or whatever to do deals to grow the business, so I think the business is being tidied up in preparation for new ownership, as others have surmised. I agree it is likely to give the new owners maximum flexibility that the shares bought back are not being cancelled.

A drop in net assets due to a lot of cash going out to buy in the minority is not something that should worry their ego, for a new source of funding, namely retained earnings will pile up at even more break-neck speed than before, to replace that lost cash, I am sure, and the ROCE will be flattered in the short term too, I wonder?

Yes, I can foresee the company being run optimally at some point in the future, but maybe not just yet. A few other things maybe have to happen first. Hence the comment "Thank you for your understanding". A plea to be patient?

[34adsaddsa] 18/5/2024 10:33

Those are very detailed comments. Have you spoken to AEP about these matters?

[skanjete2] 18/5/2024 09:26

About investments :
- at KAP they'll build a mill
- the plantation in Bangka is a bit suboptimal in scale. They are searching for a producing plantation (3000-4000ha?) to supplement the one in Bangka, which is quite old as well I guess and need replacement.
- this would create the scale for investing in an extra mill in Bangka.
- apart from these "smaller" investments to be realised by 2026, they're searching for a bigger, new plantation which could absorb up to 70m$.

[34adsaddsa] 17/5/2024 23:33

They'd probably say for flexibility. Resolution 12 at the AGM (giving the ability to allot shares) received 8,697,053 votes against.

AEP responded to that with:

"We note that the authorities sought by the Company under resolution 12 are in line with the maximum recommended levels contained within the relevant share capital management guidelines and prevailing voting guidelines of leading corporate governance agencies. The Company only retains these authorities to provide flexibility in the capital management of the Company and would only exercise these authorities if it were considered in the best interests of shareholders.

Following the AGM, the Company's Executive Director has subsequently consulted and engaged with a group of shareholders who voted against the resolution in order to hear their views and better understand their concerns.

The Board is grateful to all shareholders who provided feedback on this resolution. The common theme apparent from the engagement with this group of shareholders was their concern over dilution and that they would prefer not to grant general or annual authorities in respect of changes in equity capital, but instead to review approval when required for specific transactions.

AEP is committed to maintaining an open and constructive dialogue with all of the Company's shareholders and will continue to engage with those shareholders for whom this resolution present concerns."

On my belief that they will make acquisitions, I have five reasons:

1. They say they're trying to make acquisitions: "During the year, the Group made enquiries on acquisition of plantation lands but nothing materialised because of a lack of quality land or because it was excessively priced. The Group, as part of its strategy, will continue to maintain a disciplined strategy in seeking quality plantation land for expansion."

2. They've just spent $87.8 million buying back minority interests. That shows a willingness to spend significant cash. They didn't have to do it, they chose to.

3. They have been spending significant amounts on growth capex. That's why they will soon have eight mills. I think those internal opportunities are becoming more limited.

4. They've sold lots of weak assets. I think the ego in them will not like being smaller.

5. Having bought out the minority interests and sold loss-making assets, they will be making even greater profits and they're going to be piling up cash as long as palm oil prices stay decent. They could just keep it as cash or do some silly thing in Luxembourg, but I think it's reasonable to assume they want to do what they say they want to do: make acquisitions.

[nobull] 17/5/2024 22:00

Any idea why they do not cancel the shares but instead put them into Treasury? A bit odd.

Sure, both procedures reduce the share count and cause the net assets to drop just like a dividend leaving the company does, but putting them into Treasury gives them the option of shooting them out again, no doubt at a higher price, if they wish to, whereas cancellation can only be undone by incurring significant legal, accounting and brokerage fees, e.g. as in when new shares have to be created, for example through a subscription offer?

I remember taking taking up a rights issue at a little over a £1 in the 1980s or early 90s when Mdm Lim first got control, after which they went down to 29p. A little history!

The company has a recent habit (last 5 years?) of being run slightly sub-optimally, so they have had a long time to do inorganic growth, not a case of the asking price was always too unrealistic? May I ask what makes you think they will do that any time soon? Maintenance capex, yes; growth capex, you have got to be kidding (apart from tidying up the minority).

[34adsaddsa] 17/5/2024 17:22

AEP has spent considerable amounts of money building mills. They've just finished the 7th mill, at a cost of $22.5M.

The annual results say the 8th mill "with a planned capacity of 45 mt/hr will be sufficient to process all the crops from KAP plantation. The mill is projected to start in the first half of 2024 at a cost $15.3 million."

These are considerable investments. I think AEP is probably reaching the point of new mills not being necessary or desirable.

At that point, cash build - in the absence of distributions or acquisitions - would significantly increase.

I think that's why they say they're looking for acquisitions.

[nobull] 10/5/2024 09:55

I have had my hand forced by the BoD's actions and have had to buy this in the last couple of days (this is the last company in the world I wanted to buy shares in - the lowly balanced risk rating is enough to make any risk junkie recoil in horror): the share price underperformance with MPE is just so bad - I have been a forced buyer. Thank you for your understanding.

[34adsaddsa] 09/5/2024 20:19

But they wouldn't have the votes to do it at a bad price.

That's why I strongly opposed those arguing for an aggressive buyback/tender. We don't want votes to be further concentrated in the hands of the heirs of Madam Kim. At 52% they won't be able to screw us.

[beresford99] 09/5/2024 17:47

Sadly, I think TBTT is correct. The board must have been worried when the share hit 770p, after the measly div and cancellation of the share buyback, the subsequent 12% fall has no doubt has pleased them no end.
The share buyback never got off the ground and in point of fact, at one stage MPE we’re buying back more shares in a day than AEP we’re in a month. Even after paying an increased div their shares are now £1.60 above AEP. I’m afraid the minority shareholders will count for nothing when the company is taken private, the cash pile will be of no benefit to us at all. Strangely though, turnover seems to have perked up recently.

[tigerbythetail] 09/5/2024 13:26

Well, I figure the board can call this mission accomplished - the share price has been successfully suppressed. The cancellation of the share buyback (and the absurd reason given for it) speaks volumes.
Of course the board have an unspoken reason for behaving in this way. And, as far as I can see, that reason must be that they are engineering a low-price insider buyout of the minority shareholders, which could be financed entirely by the company's own cash pile.
I assume that we have to wait for the final settlement of Madame Lin's will to find out more. I don't know how long that will take.

[34adsaddsa] 02/5/2024 20:00

Sorry, I meant $153M cash and cash equivalents as listed in the annual results.

Redtrend used $153M net cash and I repeated it without thinking.

Might as well add the $10M in Lux to get $238M net current assets even if they aren't readily accessible.

I agree that it's very annoying.

[skanjete2] 02/5/2024 08:36

How do you come to $153m net cash?
I've got : 153 + 14 (short term) + 10 (Lux funds) = $177m net cash, or about 3,5£/share.

Especially the $10 Luxembourg investment frustrates me : why not return the clearly excess $10m cash to the owners and let them decids where to invest their cash???