KUALA LUMPUR: IOI Corp Bhd is set to register at least US$226 million (RM696 million) or a 360% gain — on paper — from its investment in Indonesia-based Bumitama Agri Ltd. The latter has just filed for an IPO on the Singapore Exchange (SGX), which is said to fetch a market capitalisation of between S$1.2 billion and S$1.3 billion (RM2.9 billion and RM3.2 billion).
According to a filing with Bursa Malaysia, IOI acquired a 33% stake in PT Bumitama Gunajaya Agro (BGA) in 2007 for US$62.63 million. After restructuring, BGA was 90% owned by Bumitama, in which IOI now has a 36% stake. Its holdings shall be diluted to 30.4% upon completion of the IPO, according to Bumitama’s prospectus filed with the Monetary Authority of Singapore yesterday.
Based on rough calculations, should Bumitama fetch S$1.2 billion to S$1.3 billion in market capitalisation after IPO, IOI’s 30.4% stake in the company would be worth S$364.8 million to S$395.2 million (or US$289 million to US$314 million), representing a US$226 million gain from its investment cost five years ago.
Bumitama, which shelved its IPO proposal last June, now plans to raise as much as S$222 million due to improved company valuations and strong demand for its shares, according to news reports quoting sources. Of the amount raised from a mix of new and existing shares totalling 297.6 million shares, some S$160 million is expected to go to the company, the news report said.
Reuters quoted unnamed sources as saying that Bumitama’s IPO shares will be priced between 67.5 Singapore cents and 74.5 cents with trading expected to start during the week of April 9. At that price range Bumitama, which will have an enlarged base of 1.76 billion shares, will have a market capitalisation of S$1.19 billion to S$1.31 billion. This prices the company at roughly 11.6 to 12.2 times historical earnings.
According to its prospectus, Bumitama posted revenue of US$319.5 million for FY11 ended Dec 31, with a profit of US$85.3 million.
An analyst said the plan for Bumitama to list comes as no surprise as there was news about it a year go.
“It is not a major contributor to IOI and the listing would not have a significant impact on IOI’s earnings. It is just an associate company,” she said, adding that post listing of Bumitama, IOI’s investment value would be higher, but since the group is not selling its shares it will not realise the value for IOI shareholders.
IOI has been providing plantation management services and technical support to Bumitama since it acquired a stake in 2007.
It is worth noting that agribusiness giant Wilmar International Ltd is buying a small stake in Bumitama via subscription of the IPO shares. This is its second share purchase in an Indonesian palm oil firm after taking a 20% stake in Kencana Agri Ltd in August 2010.
According to Bumitama’s prospectus, Wilmar’s wholly owned unit Wii Pte Ltd is among Bumitama’s list of six cornerstone investors collectively taking 124.83 million shares or about 42% of the 297.6 million shares being sold to IPO investors. Together, the six cornerstone investors will hold about 7.1% of Bumitama’s enlarged share base, the prospectus said.
Other cornerstone investors are Asdew Acquisitions Pte Ltd, Hwang Investment Management Bhd, Target Asset Management Pte Ltd, UOB Asset Management Ltd and Value Partners Hong Kong Ltd, which are not subject to any lock-up restrictions, according to the prospectus.
Bumitama’s oil palm plantations are located in Indonesia. Including those estates managed under the plasma (smallholders) programme, Bumitama has a total of 191,948ha in Indonesia of which 119,162ha or 62.1% is planted, providing avenue for growth, the company said. The total planted area comprises nucleus plantations of 87,851ha and 31,311ha under the plasma programme, representing a split of 73.7% to 26.3%.
Bumitama also manages 7,310ha owned by associates of one of its controlling shareholders, the Hariyantos, the prospectus read. Bumitama’s major shareholder is Dr Lim Hariyanto Wijaya Sarwono and his son Lim Gunawan Hariyanto, who is Bumitama executive chairman and CEO. Their 64% stake is expected to be diluted to between 50.9% and 52.6% post IPO.
“We had 75,420ha of mature and 43,742ha of immature oil palm plantation under cultivation. As we started aggressive planting only in 2004, the weighted average age of our oil palm trees now is approximately five years, and only 28.1% of them have reached peak production age. Over the next few years, given that the majority of our oil palm trees are either immature or young, we expect our fresh fruit bunch yield to improve and CPO production to increase as more of our oil palm trees mature and reach peak production age,” Bumitama said in the prospectus.
The Hongkong and Shanghai Banking Corp Ltd and DBS Bank Ltd are joint managers, bookrunners and underwriters for the Bumitama IPO.
This article appeared in The Edge Financial Daily, March 27, 2012.