Interest in banking, planting to boost BHB

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PETALING JAYA: Boustead Holdings Bhd(BHB) earnings are likely to be supported by contributions from its banking stake through Affin Bank Bhd and plantation business through Boustead Plantations Bhd (BPplant).

Analysts believe the Lembaga-controlled Tabung Angkatan Tentera (LTAT) group offers value despite its link to the Littoral Combat Ship (LCS) RM9bil scandal involving Boustead Heavy Industries Corp Boustead Naval Shipyard Sdn Bhd, 20.77% owned by Bhd’s (BHIC).

Year-to-date, BHB’s share price is up about 38% to 76 sen at yesterday’s close.

Notwithstanding the LCS link, Rakuten Trade head of equity sales Vincent Lau said BHB has been trading at a “commendable” level since bottoming out at 52.5 sen in mid-December last year and its historic low of 34.5 sen in 2020.

“Investors see the value in the stock because of its banking and plantation assets which would do quite well this year.

“With rising interest rates, banks should perform well. Affin Bank also recently sold its stake in the asset management arm, Affin Hwang Asset Management Bhd, as its core banking business is developing well.

“Its plantations division is also expected to post good profits although crude palm oil prices have fallen from their peak, but still at a firm level,” he told StarBizWeek.

BHB holds a 57.4% stake in BPlant and a 21% stake in Affin Bank. It also holds a 51.85% stake in Pharmaniaga Bhd. and 65% in BHIC.

Although the LCS link may dampen investor sentiment, Lau noted that BHB is trading at a price below its asset value, which could encourage investors to buy the stock.

At the current price of 76 sen per share, BHB’s market capitalization of RM1.55 billion reflects its stake values ​​in BPlant (RM1.04 billion), Pharmaniaga (RM458.5 million) and BHIC (72 RM.7 million) with RM994.24 million of Affin Bank shares thrown away for free.

LTAT, which owns 59.4% of BHB, also has a direct stake of 33.32% in Affin Bank, 8.16% in BHIC, 10.59% in BPlant and 8.62% in Pharmaniaga.

MIDF Research is optimistic about Affin Bank’s prospects as it undergoes a major overhaul of its services as well as divestments that aim to improve return on capital employed.

The research house said the bank was focused on growing its loan book in quantity and quality with proceeds from recent asset sales.

The bank will use the cash proceeds from the sale of its asset management business to build its loan portfolio and bolster its capital reserves.

Affin Bank posted a significantly higher net profit of RM527 million in the 2021 financial year as the MIDF expects the bank’s performance to continue to improve with better asset quality.

Kenanga Research likes mid-cap companies such as BPlant for its generous dividend payouts backed by high palm oil prices.

BHB’s net profit increased nearly sevenfold to RM290.3m in the first quarter ended March 31, 2022, from RM43.1m a year ago, while revenue grew 64 .8% YoY to RM3.43 billion.

The company, in its exchange filing, said the overall positive results were mainly due to a one-time gain from the sale of plantation land of RM364.1 million, as well as the continued robust performance of almost all divisions.

Given the government’s announcement to continue the LCS project, the diversified group expects an improvement in the financial situation of Boustead Naval Shipyard, and by extension the BHIC group as well.

BHIC expects its existing maintenance, repair and overhaul contracts to have a positive impact on its earnings in the coming quarters.

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