-  CB Industrial Product Holding Bhd (CBIP) has proposed to acquire 94% of a company, which holds two parcels of land in Central Kalimantan. The purchase consideration is RM8.2mil.

-  The two parcels of land measure 21,674ha in total. The first parcel consists of 6,267ha of convertible production forest while the second parcel has 15,407ha of land. The second parcel of land comprises 13,340ha of convertible production forest and 2,067ha of “other purpose area”, which will be used to develop palm oil.

-  According to the Bursa announcement, the purchase consideration valued the first parcel of land at RM366/ha. In respect of the second parcel of land, the convertible production forest was valued at RM366/ha while the “other purpose area” was valued at RM507/ha.

-  We believe that the purchase consideration is below market prices as the two parcels of land do not have Hak Izin Lokasi or Izin Usaha Perkebunan (IUP).

-  In addition, the convertible production forest area needs to apply for a relinquishment of forest area from the Ministry of Forestry first.

-  The last land bank transaction by a Malaysian plantation company in Indonesia was carried out by Kulim Bhd in October 2013. Kulim acquired 40,645ha of land in North Barito, Central Kalimantan for roughly RM4,645/ha. The landbank has Hak Izin Lokasi and IUP.

-  Landbank acquisitions have been quiet this year due to uncertainties over the proposed land bank limit of 100,000ha and the upcoming presidential elections in Indonesia.

-  After the proposed acquisition has been completed, it would increase CBIP’s plantation landbank to 86,715ha.

-  Currently, CBIP has 65,041ha of land in Indonesia, which are mainly located in Central Kalimantan. As at end-March 2013, about 3,400ha of the land had already been planted. The group plans to plant about 6,000ha of land every year.

-  CBIP’s plantation division recorded a pre-tax loss of RM2.2mil in 1QFY14. Maintain BUY on CBIP with an unchanged fair value of RM5.15/share. 

Source: AmeSecurities