Sime Darby unlikely to attain full ownership in NBPOL, says Moody’s

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KUALA LUMPUR (Oct 13): Sime Darby Bhd is unlikely to attain full ownership in New Britain Palm Oil Ltd (NBPOL), said Moody’s Investors Service, as government-related entities currently hold around 22% of NBPOL and may wish to increase their ownership interest.

While Sime Darby aims to fully own NBPOL and has stated that it wants a minimum 51% stake in the company, the global rating agency said it is unlikely that full ownership will be achieved.

It added that NBPOL is therefore likely to remain listed, but not in London, allowing the company to raise funds for expansion or make selective share placements to dilute Sime Darby's stake if required.

In a statement today, Moody’s vice-president and senior credit officer Alan Greene also pointed out that the proposed acquisition would increase Sime Darby's planted area by 15%.

Sime Darby's 525,290ha of oil palm as at June 2014, combined with NBPOL's 79,884ha of oil palm in the same period, would amount to 1.62 times that of Felda Global Ventures Holdings Bhd and 1.29 times that of Golden Agri-Resources Ltd.

“The acquisition would also improve the geographical diversity of Sime Darby's palm oil sources, thereby mitigating the risk of unfavorable localised weather,” added Greene.

The addition of NBPOL's plantations in Papua New Guinea (PNG) in Sime Darby would result in a planted area profile that is well-balanced between Malaysia and overseas. In particular, about 51% in Malaysia, 34% in Indonesia, 13% in PNG and 2% in Liberia on a pro-forma basis, said Moody's.

It noted that the acquisition would enhance Sime Darby's European sales channel, given that NBPOL's 300,000 ton per annum (tpa) refinery in Liverpool is fully certified by the Roundtable of Sustainable Palm Oil, and complements Sime Darby's existing 450,000 tpa refinery in the Netherlands.

“While operations in PNG are exposed to regulatory and security risks, NBPOL's operating track record in PNG is long, and its plantations exhibit yields that are above average relative to industry peers,” it said, adding that NBPOL’s operations are immediately earnings before interest, taxes, depreciation and amortisation (ebitda) accretive, with NBPOL generating US$97 million of reported ebitda at a 17.3% ebitda margin in 2013.