Changing circumstances forces LTAT to scrap Boustead privatisation


POTENTIAL uncertainties as a result of prolonged Covid-19 measures are among factors that have led Lembaga Tabung Angkatan Tentera (LTAT) to drop its plan to take Boustead Holdings Bhd private.

The armed forces fund in a statement last week, clarified the decision was deemed necessary due to uncertainties to its key businesses under Boustead Group (banking, hotels, property and retail petroleum) impacted by Covid-19.

“Ongoing uncertainties surrounding the Littoral Combat Ship (LCS) project and leadership changes at both LTAT and Boustead which require sufficient time to review ongoing projects and initiatives are part of the reasons.

“Other circumstances were clarity on Boustead Group’s rejuvenation plan, including its plan to address its debt levels,” it highlighted.

On Feb 2, LTAT said it decided to cancel the privatisation of Boustead after evaluating the current challenging economic environment arising from Covid-19 and the reimplementation of the Movement Control Order.

According to LTAT, Boustead’s share price was at a rock bottom of 35 sen on March 23, 2020, and remained below 50 sen until mid-May 2020, which provided an opportune time for LTAT to privatise.

“It was also probably the right time and opportunity for minority shareholders to potentially exit, given the underperforming share price in spite of the higher underlying value, relative to its net tangible assets (NTA) of RM1.60.

“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 of the group, primarily the LCS project and other key pro- jects such as hotels and property,” it said.

Hence, LTAT saw the privatisation as a move to protect the value of LTAT’s investment, as well as to pave the way to support the potential restructuring of the Boustead Group, which was being planned.

“This would have helped accelerate LTAT’s own strategic transformation plan, which involves capitalising on immediate high-impact initiatives as catalysts to address immediate gaps and creating value as we work towards achieving longer-term sustainability,” it said.

However, closer to the deadline of Feb 2, it was a conscious decision by LTAT to allow the deadline to lapse at this juncture, considering the changing circumstances sur- rounding the privatisation, which resulted in heightened risks towards ensuring the successful completion of the privatisation.

“While the privatisation may not be timely at this juncture, the lapse in deadline will enable us to review and reassess our strategies as part of our intention to fully assess and further fine-tune LTAT’s five-year strategic transformation plan.

“LTAT remains steadfast in continuing its transformation journey towards becoming a world-class pension fund. In line with our contributors’ retirement objectives, LTAT shall remain true to its nature as a long-term investor and a custodian of patient capital, hence we shall not hesitate to be judicious in carrying out our investment strategies,” it explained.

LTAT’s current focus is on the execution of its strategic asset allocation framework, which was completed towards the tail end of 2020. The framework sets LTAT’s long-term targets to deploy capital towards better diversification of our portfolio of investments.

In this regard, LTAT intends to rebalance its portfolio by increasing fixed-income investments (20%), reducing real estate and private equity exposure (10% each), increasing diversification of its public equity portfolio (50%) and the remaining in other asset classes including money market instruments.

At a later stage, LTAT also intends to commence its plan for international diversification similar to other peer institutions.

“LTAT will continue to work closely with Boustead in terms of providing support towards its ‘Rejuvenating Boustead’ plan and future growth strategies,” it said.