THE BUZZ
Genting Plant has entered into an agreement to acquire a
stake in a joint venture (JV) with
Global Agrindo Investment Company Ltd to cultivate 74,390ha of oil palm
plantation land in Central Kalimantan. The
company will fork out USD116.0m (RM356.5m) for a 63.2% stake in the JV, and will ultimately
hold 60.0% of the Indonesian assets
after taking into account the minority stakes in several subsidiaries. Of
the total landbank, 14,150ha of nucleus area and 4,195ha of plasma area have
been planted.
OUR TAKE
The JV will increase Genting Plant’s total landbank in Malaysia and Indonesia from
165.6k ha to 240.0k ha while boosting the planted area in Indonesia to about
48.1k ha. As there is no visibility on the age profile of the 14,150ha planted,
we are not factoring this into our earnings forecasts as yet. The acquisition
of the stake in the JV is expected to be completed by the end of 2Q this year.
Genting Plant had RM589.8m in net cash as at end-CY11. After paying RM356.5m for its JV
stake, it will still be
holding net cash, and as
such the
deal will not stretch its balance sheet.
In terms of purchase price,
Genting Plant’s 60% stake for USD116.0m implies an enterprise value of USD193.3m. The
14,150ha of planted area alone is worth USD169.8m,
assuming that these
plantations have young trees
and the
pricing is USD12k per planted ha. Thus, we deem the purchase price
inexpensive.
Maintain Buy on Genting Plant, with its FV at RM10.13.
Source: OSK188
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