PETALING JAYA: The Armed Forces Fund Board (LTAT) has clarified that the decision to allow Boustead Holdings Bhd’s privatisation bid to lapse was due to, among others, heightened risk attributed to the Covid-19 pandemic that might delay the move.
In addition, it cited uncertainty surrounding its key businesses in banking, hotels and retail petroleum to name a few affected by pandemic, as well as ambiguity in the key littoral combat ship (LCS) project.
The majority shareholder also pointed out that leadership changes in the board and Boustead will require a review of ongoing projects and initiatives along with the group’s rejuvenation plan to address its debt level as risk to the completion of the privatisation bid.
LTAT reiterated that the circumstances surrounding the bid has changed drastically since it started in May 2020 as the volatility from Covid-19 continues to impact the businesses of Boustead.
Back then, it was in the midst of executing a strategic transformation plan which involved the need to rebalance its portfolio.
Subsequently, the fund’s assets remained heavily invested in public equity with a 58% share, as Boustead and Affin Group accounted for 31% and 17% of its total assets under management of RM9.6 billion, respectively.
It highlighted that the fund has been heavily reliant on dividend income from the group in the past but Boustead has not paid any dividend since FY2019 due to worsening financial performance, driven by major impairments against a backdrop of challenging economic conditions.
Furthermore, the counter’s rock bottom price of 35 sen on March 23, 2020 which have remained below the 50 sen mark for another months provided an opportunity for LTAT to privatise, which allowed a potential exit for minority shareholders given the underperforming share price in spite of the higher underlying value, relative to its net tangible assets (NTA) of RM1.60.
It also acknowledges that the NTA was possibly not accorded by the market for reasons, which may include declining profitability, high debt levels and uncertainties surrounding certain key projects.
Against this backdrop, the fund saw the privatisation bid as a means to protect its investments and pave the way to support a planned restructuring of the group’s board which would accelerate its own strategic transformation plan.
Moving forward, LTAT stated that the current focus is the execution of its strategic asset allocation framework, that was completed end-2020, which entails a better diversification of its investment portfolio.
Under the framework, it intends to rebalance its portfolio by increasing fixed income investments (20%), reducing real estate and private equity exposure (10% each), further diversify its public equity portfolio (50%) and the remaining in other asset classes including money market instruments.
The fund remains committed to the mandate to generate sustainable returns in fulfilment of its duty to its contributors, the armed forces personnel.
Source: The Sun Daily
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