Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on February 12, 2016.

 

KUALA LUMPUR: Kulim (Malaysia) Bhd’s 74%-owned subsidiary PT Wisea Inspirasi Nusantara (PT WIN) plans to acquire 95% equity interest each in four Indonesian plantation companies for RM509.35 million.

The four target companies’ collective land bank stands at 104,904ha — of which 34,382ha have been planted — while their plantation assets, valued at some 2.87 trillion rupiah or RM892.88 million, are spread over the provinces of South Kalimantan, South Sumatra and Aceh.

In a bourse filing, Kulim said it entered into agreements with PT Agro Maju Raya, PT Mitra Plantation and PT Agri Capital Resources for the respective 95% stakes in PT Nusa Persada Indonesia, PT Surya Panen Subur, PT Tempirai Palm Resources and PT Rambang Agro Jaya.

 “The proposed acquisitions represent a unique opportunity for Kulim, via PT WIN, to acquire mid-sized oil palm plantation companies. Further, the proposed acquisitions are in the ordinary course of business of the Kulim group of companies and also in line with Kulim’s business direction to expand its plantation land bank and gain larger market access in Indonesia,” said the company.

 Kulim said the proposed acquisitions will increase its total cultivated plantation land bank to 81,392ha, with the additional 34,382ha of planted land bank from the target companies.

As at Dec 31, 2014, Kulim’s total plantation land bank stood at 226,253ha. Out of the total, 51,160 ha are located in Peninsular Malaysia, 40,195ha in Indonesia, 126,871 ha in Papua New Guinea (PNG) and 7,577 ha in the Solomon Islands. However, Kulim sold its stake in New Britain Palm Oil Ltd, which owns plantations in PNG and the Solomon Islands, last year.

Meanwhile, Kulim noted that the total mature area of the target companies as at Dec 31, 2015, stood at 11,953ha, making up approximately 15% of the total plantable area.

 The group expects to incur additional costs and operating expenditure for the development of the plantation assets, including rehabilitation cost, land compensation and capital expenditure.

 “In view of this, it is expected that it will take [a] few years before the plantation matures, [the palms] reach their prime age, and contribute to the earnings of the Kulim Group.

 “Notwithstanding the above, and given the challenging outlook of the oil palm plantation sector, the proposed acquisitions are expected to enhance the Kulim Group’s earnings in the long term when the overall market condition improves along with the price of crude palm oil,” it said.

Kulim intends to fund the purchase consideration via a combination of bank borrowings and internally-generated funds, with the exact proportion to be determined at a later stage. It expects to complete the acquisitions in the second half of 2016.

The proposed acquisitions will not have any material effect on its net asset or net asset per share, though it will raise the gearing of the group by the quantum of external borrowings to be used to finance the buys, and the existing debt held by the target companies, which would be consolidated into Kulim Group upon completion.

As at Sept 30, 2015, the aggregate borrowings of the target companies were about two trillion rupiah (RM621.06 million).

Kulim closed three sen or 0.79% lower at RM3.76 yesterday, with a market capitalisation of RM4.69 billion.

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