KUALA LUMPUR (Aug 22): Boustead Plantations Bhd is planning to buy 42 parcels of plantation land in Sabah, which measure a collective 11,600ha, for RM750 million.

The group has issued a letter of intent (LoI) to the land owner — Pertama Land & Development Sdn Bhd — which has been accepted, for the proposed buy, the group said in an announcement today.

The plots are located in the districts of Labuk and Sugut. Following the acceptance of the LoI by Pertama Land & Development, it said a due diligence will be conducted within 30 days.

"This is an ideal opportunity to expand our land bank with viable plantation land to complement our existing operations in Sabah," said Tan Sri Datuk Seri Lodin Wok Kamaruddin, vice chairman of Boustead Plantations.

Separately, the group announced its net profit for its second quarter ended June 30, 2017 (2QFY17) fell 77% to RM22.7 million from RM97.55 million a year ago, largely because the previous year had recognised a gain on disposal of plantation land.

However, better fresh fruit bunches (FFB) production and higher crude palm oil (CPO) prices contributed positively to its current quarter's profit, Boustead Plantations said in a Bursa Malaysia filing.

Meanwhile, quarterly revenue slid 3% year-on-year to RM169.49 million from RM174.92 million in the previous year's corresponding quarter, the group said.

It declared a 3 sen second interim single tier dividend, payable on Sept 19, 2017.

Excluding the gain on disposal a year ago, the group's unaudited pre-tax profit came in at RM85.8 million for the first half of its financial year ending Dec 31, 2017 (1HFY17), a 217% improvement from the year before, it said. Revenue for the period grew 15% to RM358.51 million from RM311.9 million.

Going forward, the group said although FFB yields are improving in Peninsular Malaysia and Sabah, labour shortage and difficult ground conditions in Sarawak may hamper crop production.

"The downward pressure [on CPO prices] in the second half is very likely amid slower demand from the traditional markets, projected increase in CPO production, and drop in biodiesel production in Indonesia," Boustead Plantations said.

It added that lower yields in soybean production in the US could widen CPO's discount to soybean oil, thus improving its appeal in price-sensitive markets.

In a separate announcement, Boustead Plantations said it has approved a variation to the usage of its initial public offering (IPO) proceeds, which will see RM365.2 million allocated towards the repayment of bank borrowings for previous land buys.

It initially allocated RM420 million of the RM928 million IPO proceeds via its June 2014 listing for the acquisition of plantation lands, although it stated in the prospectus that if this was not used within 36 months, the remaining amount would be used to repay bank borrowings.

To date, Boustead Plantations has used RM63.8 million of the proceeds to acquire beneficial interests in lands in Sugut, Sabah, it said.

"Consequently, if the intention to acquire [the Sabah plots] materialises, it will be funded via internally generated funds and/or bank borrowings," it added.

Boustead Plantations closed unchanged at RM1.66 on 354,800 shares traded, giving it a market capitalisation of RM2.64 billion.