- The Press reported that Felda Global Ventures Holdings Bhd (FGV) may be buying Asian Plantations Ltd (APL), which is listed on the London Stock Exchange.

- APL was incorporated in Singapore but has plantation operations in Malaysia. Currently, APL has four estates in Bintulu and Miri, with landbank amounting to 20,770ha.

- As at end-FY12, APL’s planted area amounted to 13,627ha in total. According to its annual report, APL expects to have a planted area of 18,000ha by FY13F. Based on information from the website, we estimate that APL’s mature areas are about 5,800ha. APL has a palm oil mill, which has a capacity of 120 tonnes per hour.

- Based on APL’s closing share price of 2.15 pounds, it would cost FGV about 100.6mil pounds (RM551.7mil) to acquire 100% of APL.

- Based on the purchase consideration of RM551.7mil and landbank of 20,770ha, we estimate that FGV would be acquiring APL at RM26,562/ha.

- The last market transaction for plantation landbank in Sarawak was carried out by TH Plantations, which paid RM38,084/ha for 6,514ha in Bintulu in 2012. Out of the 6,514ha, about 5,424ha were already planted with oil palm trees between one to four years old.

- According to news report, APL’s oil palm estates are on mineral soil. APL’s main shareholder, Keresa Plantations Sdn Bhd is the only RSPO (Roundtable for Sustainable Palm Oil) member in Sarawak.

- We are marginally positive on this acquisition, if any. We believe that it would help reduce the average age of FGV’s oil palm trees, which is 16.7 years old currently.

- However in the immediate term, we do not expect any earnings contribution as APL recorded a net loss of US$6.9mil in FY12. Consensus has forecasted APL’s net loss to widen to US$12.3mil in FY13 before narrowing to a smaller loss of US$5.5mil in FY14F.

- APL’s net gearing was high at 188% as at end-FY12. Gross cash stood at US$15.8mil while total borrowings amounted to US$126.5mil. Maintain HOLD on FGV. 

Source: AmeSecurities