IJM Plantations - Proposes to acquire 4,620ha of land in East Kalimantan Buy

- IJM Plantations Bhd (IJMP) has announced that it proposes to acquire 95% of PT Karya Bakti Sejahtera Agrotama for Rp23.75bil or RM7.7mil cash. 

- PT Karya is in the midst of cultivating oil palm on a plot of land measuring about 4,620ha in East Kalimantan. 

- The company has successfully obtained the plantation permit or “Izin Usaha Perkebunan” for its land.

- We view the proposed acquisition positively as it would expand IJMP’s plantation landbank and help sustain the group’s long-tem profitability. 

- We estimate that IJMP has roughly 71,660ha of land in Indonesia currently. Including the above acquisition and landbank in Malaysia, IJMP’s plantation landbank would come up to about 105,372ha in total. 

- Out of the 71,660ha of land in Indonesia, approximately 22,605ha have already been planted with oil palm. 

- Presently, contribution from IJMP’s Indonesian oil palm division is still insignificant. We believe that the kicker would come in from FYE3/14F or FYE3/15F onwards.

- In 1QFYE3/13, IJMP’s oil palm estates in Indonesia  recorded FFB production of 8,610 tonnes. 

- In FYE3/12, the group’s FFB production in Indonesia was about 21,979 tonnes. FFB yield was approximately 14.2 tonnes/ha.

- We estimate that the group would most likely chalk up FFB output of 40,000 tonnes to 50,000 tonnes in Indonesia in FYE3/13F. 

- We maintain a BUY on IJMP for its well-managed plantation operations and long-term profit growth from Indonesia.

Source: AmeSecurities