KUALA LUMPUR (March 6): Genting Plantations Bhd has tied up with Musim Mas Group to set up a palm oil refinery in Sabah.

In a statement, Genting Plantations (fundamental: 2.7; valuation: 1.5) said the refinery, to be located in the Palm Oil Industrial Cluster in Lahad Datu, will cost about RM300 million.

It will have a capacity of 600,000 tonnes per annum or 1,800 tonnes per day and is targeted for completion in the second half of 2016, the statement added.

Both companies had signed an agreement to set up Alfa Raya Development Sdn Bhd to helm the project, with Genting Plantations holding a 72% stake in the entity, while Musim Mas Group to hold the remaining 28% stake.

Genting Plantations chief executive Tan Sri Lim Kok Thay said the refinery will be part of the Genting Integrated Biorefinery Complex that the company is establishing for the production of high value-added downstream products.

“We look forward to collaborating with Musim Mas Group, a renowned leader in the refining business, and we are confident that this will be a mutually beneficial partnership that will enhance value for our respective stakeholders,” Lim said.

Musim Mas Group executive chairman Bachtiar Karim said the partnership is the beginning of a closer working relationship between Musim Mas Group and Genting Plantations Group.

“The pooling of Musim Mas Group’s extensive experience in processing and marketing of refined palm oil products and Genting Plantations’ strong supply base, will create synergy for the stakeholders,” he added.

With the Genting Integrated Biorefinery Complex, Genting Plantations aims to create high-performance palm oil derivatives using green and efficient processes, at significantly lower production costs and capital investments than conventional petroleum-based processes.

Musim Mas Group is among the biggest players in the vegetable oil refining and soap manufacturing industries in Indonesia, and owns the largest palm oil refinery in the world.

It also owns a fleet of ship tankers and barges to enhance its logistic capability.

Genting Plantations, a subsidiary of Genting Bhd (fundamental: 2.1; valuation: 0.6), owns seven palm oil mills in Malaysia and two in Indonesia, with a total milling capacity of 405 tonnes per hour.

Today, Genting Plantations’ shares closed 14 sen or 1.47% lower at RM10.10, with a market capitalisation of RM7.85 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)