• Malakoff Corporation has proposed to acquire 71.4ha or 176.5 acres of land in Alor Gajah, Melaka for RM150mil.

• The seller of the land is Tradewinds Plantation Bhd. The cost of the land was RM4.2mil. Tan Sri Dato’ Seri Syed Mokhtar is a major shareholder of Tradewinds Plantation and MMC Corporation, which is the holding company of Malakoff.

• The land is currently planted with oil palm trees aged from 13 to 39 years old. In the past three years, the oil palm estates produced more than 710 tonnes of FFB.

• We are neutral on this development. Malakoff said that the land will be used for future development of renewable energy power plants.

• We believe that Malakoff would be participating in the tender for waste-to-energy power plants in Malaysia in the future.

• In July 2020, the Minister of Housing and Local Development said that there would be at least six waste-to-energy plants in the country in the future.

• We think that the purchase consideration of RM150mil for 71.4ha of oil palm estates is expensive. Malakoff said that the purchase price was arrived at after taking into consideration the market valuation report by an independent land valuer.

• Malakoff also said that the most important aspect of the land is the availability of the injection point. Malakoff can tap into the 132kW transmission line within the site or via direct connection to the nearby substations.

• We do not expect any earnings impact from the acquisition of the land. The proposed acquisition is expected to be completed in 4QFY20.

• We maintain BUY on Malakoff with a fair value of RM1.10/share.

Source: AmInvest Research - 23 Sept 2020