Journey to Wealth
IOI Corporation - Bumitama to list on 12 April, tentatively BUY
- IOI CorporationBhd's associate, Bumitama Agri Pte Ltd, would be seeking a listing on the SingaporeStock Exchange. The tentative listing date is 12 April, Thursday. The book forthe subscription of the IPO would close on 2 April, Monday.
- Upon the listing ofBumitama, IOI's shareholding would be diluted from 36% to 30.4%. In 2007, IOIpaid US$72mil (RM252mil) for the stake in Bumitama.
- As mentioned in ourreport dated 13 March 2012, we view the listing of IOI's associate positively.
- Although therewould not be a significant impact on IOI's share price, the listing of Bumitamawould allow IOI to place a value on its investment in the group. IOI would alsobe able to enjoy dividend payments from Bumitama should the latter return cashto shareholders.
- In terms ofhectarage, Bumitama's planted landbank of 119,162ha is roughly 10% smaller thanFirst Resources' 132,251ha. First Resources' FFB yield of 22.2 tonnes/ha isalso higher than Bumitama's 16.3 tonnes/ha. First Resources is currentlytrading at FY12F PE of 13.1x based on Bloomberg consensus estimates.
- Bumitama's FFByield is low due to the young age of its oil palm trees. Average age of its oilpalm trees is five years old. Approximately 28% of the group's (nucleus andplasma) trees are in the prime age of seven to 18 years old.
- Bumitama recorded a39.8% to 45.2% increase in FFB production p.a. in FY10 and FY11. This wasunderpinned by aggressive new plantings carried out from FY04 to FY08. Onaverage, Bumitama planted 12,341ha annually between FY04 and FY08. Bumitamaplans to plant 13,000ha of land with oil palm annually going forward.
- Assuming a 10x-12xPE on FY12F earnings, Bumitama's fair value would range between S$0.605/shareand S$0.725/share. Based on a share price of S$0.725/share, Bumitama's marketcapitalisation would be S$1.27bil. IOI's 30.4% stake would be worthS$387mil.
- Bumitamacontributes significantly to IOI's earnings. IOI's share of profit in Bumitamarose 83% from RM42.6mil in FY10 to RM78mil in FY11. In 1HFY12, IOI's share ofprofit in Bumitama expanded 39.8% YoY to RM49.5mil.
Source: AmeSecurities
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