KUALA LUMPUR (Sept 28): Boustead Plantations Bhd has proposed to sell Kulai Young Estate in Johor for RM429 million to YTL Power International Bhd’s 70%-owned subsidiary SIPP Power Sdn Bhd.

The group expects to realise an estimated RM323 million upon completion of the disposal of the 664ha of plantation land.

This translates into a gain of RM486,400 per hectare, which will increase value for its shareholders by 14 sen per share, said Boustead Plantations in a statement on Tuesday.

The sale consideration is 10% or RM39 million higher than the market value of the land of RM390 million accorded by independent valuer C H Williams Talhar & Wong Sdn Bhd. 

Boustead Plantations chief executive officer Zainal Abidin Shariff said the deal is an ideal opportunity for Boustead Plantations to monetise this asset in line with the group’s Reinventing Boustead strategy.

“It is indeed beneficial for the group, as we are able to unlock the asset value and the proceeds will be utilised to pare down borrowings and meet our working capital requirements,” he said.

“The proceeds from the proposed disposal will allow us to strengthen the balance sheet for future growth and manage our gearing by way of paring down borrowings, reducing the group’s gearing ratio from 0.48 times to 0.31 times,” he added. 

Following the repayment of borrowings, the group is expected to save interest cost of about RM15 million per year. 

Boustead Plantations will also strengthen its relationship with SIPP Power by securing a five-year plantation management agency agreement, which will contribute to the former's earnings. 

YTL Power managing director Datuk Yeoh Seok Hong said the acquisition of Kulai Young Estate is extremely strategic to the group with its accessibility and proximity to high growth industrial developments.

“We have been seeking opportunities for YTL Power to invest in renewable sources of energy and solar is definitely a priority as the country has substantial solar capacity,” he said. 

Boustead Plantations shares closed unchanged at 58 sen, valuing the group at RM1.31 billion.