- Felda Global has made a cash offer of GBP2.20/share for shares in Asian Plantations Ltd (APL), which is listed on the London Stock Exchange. The total purchase consideration (including share options and shares from convertible bonds) is GBP120mil or RM628mil.

- We are marginally positive on this. In the short term, Felda Global’s earnings are not expected to receive a boost from the acquisition of APL as it is still loss-making. APL recorded a net loss of RM32.8mil in FY13.

- The age profile of APL’s oil palm trees was not disclosed. However, we believe that most of its trees are young. In FY13, APL sold 26,584 tonnes of CPO and 12,455 tonnes of FFB.

- In the longer term, Felda Global would benefit from the increase in its landbank. Currently, Felda Global has a landbank of 446,656ha.

- APL has a landbank of 24,622ha in Sarawak. Out of these, about 12,161ha are already planted. APL also had cash of US$10.8mil and borrowings of US$133.8mil as at end-Dec 2013. According to previous news reports, APL’s landbank sits on mineral soil and its main shareholder, Keresa Plantations Sdn Bhd is an RSPO member.

- Based on APL’s landbank and financial data, we believe that Felda Global’s purchase consideration would value APL at RM41,507/ha. The actual purchase consideration would be lower as APL has a palm oil mil with a capacity of 60 tonnes per hour, which can be ramped up to 120 tonnes per hour.

- We believe that the purchase consideration is fair. In October 2012, TH Plantations acquired 6,514ha of land in Bintulu for RM39,084 per ha.

- Felda Global’s offer of GBP2.20/share is just 3.5% above APL’s closing price of GBP2.125/share. If public shareholders do not accept Felda Global’s offer, Felda Global would still have control over APL.

- This is because APL’s main shareholders with total equity interest of 51.3% have already given their irrevocable undertaking to Felda Global’s cash offer.

- Felda Global is not expected to face any problem financing the acquisition of APL. It had net cash of RM3.4bil as at end-FY13. Maintain HOLD on Felda Global with an unchanged fair value of RM3.83/share. 

Source: AmeSecurities