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Yes hops, you are right.
For the record, I have no objection to our BoD changing our business model to that of a vertically integrated operation more like KLK's - it makes sense to take advantage of the artificially low feed stock price compared with the international price, all made possible by the $50 per tonne export levy, giving Indonesian operations an additional competitive advantage. However, our BoD has it hands full for the next two years with its, say, $50m capex program (two mills and associated biogas plants @ $25m each?), not that expansion outside one's core area of competence isn't without risk, to say nothing about dilution and finance risk if such a move downstream is too capital intensive.
My daughter, like you, if she invests here would prefer a cash exit free of commission and market-maker rake-off; she has rejected my advice to invest in REA ords, although I have argued it is de-risking even if it is only de-leveraging very slowly (substituting pref arrears for bank debt to a degree), and maybe rightly so given my woeful investment record. See you at the next AGM as long as it is not in Ipoh. All the best.
CJ66, thank you for all that interesting info.
No Bull! It occurs to me that you may be a beneficiary under your "relations"estate?
I think you need to see the other side of the coin as well - when the increased offer lapsed, KLK had picked up just 13.2%.
This shows people voted with their feet - and not just the institutions.
I think there is some way to run yet and KLK will want to get to that 29% before they can have much assurance of the same happening again.
KLK is a rather ugly behemoth and has been cited for rainforest destruction, landgrabbing and child labour + it made a right mess up with Equatorial palm oil.
I would prefer it to keep a stake in MPE and watch how good management can work.
Interestingly, although KLK blocked the buy back, they did not appear to vote against any of the other resolutions.
I should add that of the 54.72% of significant holders who supported the BoD in rejecting the approach related to the initial offer for £6.40 per share. The revised offer of £7.40 only resulted in 40.85% of significant holders supporting the board.
Just did some checking, of the 54.72% of major holders who backed the board and repelled KLKs 2016 attempted take over - many have sold down stakes since with KLK buying up the slack. This concerns me any new approach is unlikely have the blessing of the board ( unless it’s £10.00 plus) Defence might be harder this time.
KLK blocking the share buyback was the first salvo IMO, now they are buying stock again..... I am suspicious they will come knocking again, soon.
My relative has no interest in being part of a larger organisation with higher value-add palm derived product processing facilities. Neither does she want cash (CGT followed by IHT , no thank you ). If you have to suffer IHT, you want the biggest death CGT price uplift possible. Have you ever tried to get UK probate accepted in a foreign country to transfer a stock? There are no benefits for my relative, losing BPR and taking KLK paper. I can't speak for anybody else, but KLK are my worst nightmare come true. I want MPE to remain independent.
OL112 Yes I agree with your sentiments. Obviously "NO BULL!" has not researched KLK and is unaware if its other substantial investments. Fools and their money are soon parted.
Time to read what you dislike but too dim to put an alternative narrative? Go and sit your rear end on a Petronas Tower spike and hurl your zingers from there.
I apologise I omitted to the word "research".
I intended to say " It would be refreshing if "No Bull" did a little more in depth RESERCH before going into print!
It would be refreshing if "No Bull" did a little more in depth before going into print!
The price my relative would need to compensate for loss of BPR would be extremely eps dilutive for KLK shareholders. I think the directors of KLK just want to pay themselves more for controlling more plantations and don't give a stuff about growing eps for their shareholders: there is no happy middle way between the two, us getting a fair price and their shareholders not being diluted out to kingdom come: one side will get cheated. It is not in the interests of the Indonesians to have foreigners skimming off an economic rent from starting up new plantations (well it is and it isn't but that's another story): they want these profits from privilege rather than from risk taking for themselves) and then invite the foreigners in to make the more lacklustre returns that accrue after a native has skimmed off the rent, so I wonder if KLK suffers from these sort of rebuffs by the Indonesians, hence their interest in trying to skim off a rent buying us at a time of lowish palm oil prices when we have such an attractive production growth profile (the next best thing to buying vacant land and starting a plantation from scratch). Bog off KLK.
In the event of another hostile offer from KLK it might be harder than last time to rebuff their advances. This is based on the reduced number of major shareholders listed on the MPE site whom the BoD could call upon for immediate support. Last time KLK had no chance of acceptance as more than 50% of holders voted with the BoD. Everything has a price and non of us are getting any younger ( BoD included) however I would prefer we stay independent with KLK simply a shareholder for now.
Yes, anything that helps KLK is bad news for long term shareholders. In my relative's case (the person who owns these shares, bought on my advice when the palm oil price was a lot higher - er, slight boo boo there) would lose BPR, as KLK with a foreign listing would not qualify, so her legatees would need a 66% premium on her average entry price to be left with the same starting capital after suffering 40% IHT on the estate.
There are lots of good things to look forward to: the volume gearing effect from the growing production profile, the near absence of finance risk on the mills for Bumi Mas and Musi Rawas, one mill and biogas plant of which is almost fully funded by the recent land transaction, leaving the other to be funded from bank borrowings, and internally generated funds, the latter if CPO price gets back to its more normal 10 year average (no equity dilution). And then there is the palm oil price gearing effect. The divs make my relative very happy.
There seem to be no worthwhile economies of scale from controlling more oil palm plantations: savings from diluting head office costs against greater CPO production are hardly worth the bother compared with the cost of advisors on hostile bids.
Yes, I agree the BoD are excellent, and thanks CJ for pointing out the achievement of growing third party ffb processing, an achievement I had not really taken in.
I agree Nobull, I see this as long term potential and a takeout is bad news for any long term shareholders who value growth + dividends. I originally invested here just sub 50p around 25 years ago.
The management is excellent - just look at how pro active they were at rebuffing the takeover but also the latest H1 announcements showing how they really focused on gaining outside smallholders crops to the tune of 157%.
This is lower margin but will feed well into profits and shows they are already well geared up for their own expanding CPO.
Haven't seen any new notifications from KLK - but they can get lost as far as I'm concerned!
One of the institutional shareholders is probably reducing. About 0.46m shares traded today. KLK might bid again, not to add value for their shareholders, but just to be in charge of a bigger revenue stream. Every share they get sub £7.40, they must think they are on to a winner - no wonder they don't like MPE buying in its own shares for cancellation at these prices - I don't know which is worse, your advice or KLK. By reducing their stake, the selling institution is not supporting the directors - they just make it easier for KLK to get control at a derisory price. All of them are ghastly, you, the selling institution and KLK.
Good advice hops - his has been demonstrated previously, fair to say any offer would need to be at the right price and have the blessing of the Board. Maybe some of them might be looking to cash out in the coming years who knows. Happy to wait ... tomorrow would be great .... if not happy to collect the dividends for the next 10 years.
The Institutional Share Holders who "collectively" own this company have made it very clear by their "inaction" that they
intend to support the Directors, so any one who is anticipating a quick profit would be well advised to look elsewhere!