KUALA LUMPUR (Mar 28): Sime Darby Bhd, which recently completed its acquisition of New Britain Palm Oil Ltd (NBPOL), has paid a fair price for the latter, according to Sime Darby president and group CEO Tan Sri Mohd Bakke Salleh.

The Edge Malaysia business and investment weekly (Edge Weekly) in its latest March 30 - April 5 issue, quoted Mohd Bakke as saying the £7.15 (RM39.05)-a-share price for the entire stake in Papua New Guinea (PNG)-based NBPOL was acceptable. This was due to suitable landbank scarcity besides the high costs and risks of greenfield development.

"We believe we have paid a fair market price. The price expectation of a successful acquisition following the failed Kulim ((M) Bhd) bid was between £6.50 and £7 per share. We paid £7.15 per share, which was at a slight premium to that price. 

"In return for the premium, we are getting quality brownfield assets, that is ~135,000ha of landbank with ~81,500ha planted that are fully RSPO certified. Besides oil palm, NBPOL is also involved in beef, sugar and seed production. Furthermore, Sime Darby sees this acquisition as the gateway to future expansion within and outside PNG," he said.

Mohd Bakke was speaking to Edge Weekly in Port Moresby, PNG where he attended an event to mark the completion of Sime Darby's acquisition of NBPOL on March 2 this year. 
   
According to him, NBPOL’s upstream business is clearly visible to the market. Mohd Bakke, however, said Sime Darby (fundamental: 1; valuation: 0.9) viewed NBPOL's downstream operations as the "hidden jewel".

He said this was because NBPOL had succeeded in commanding a price premium for its sustainable palm products.

"I think not every plantation player will be able to appreciate NBPOL’s strengths. Sime Darby and NBPOL’s strengths in the production of sustainable palm oil represent not only our shared business practices and beliefs but also a platform to do greater things together across the value chain," he said.

Besides plantations, Mohd Bakke also shared his views on Sime Darby's plans for its other businesses. These include property development, automotive dealership, and utilities.
  
For a better understanding on Sime Darby under Mohd Bakke's stewardship, kindly pick up and read the latest issue of the Edge Weekly.

(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.)

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