- According to news reports, Lembaga Tabung Haji (LTH) hasconditionally accepted a proposal by an Indonesia-based company to buy its 95%stake in PT TH Indo Plantations (THIP). LTH said that it first received aproposal to acquire its stake in THIP in February 2012.
- The disposal price of the oil palm estates in Indonesiawas not disclosed. We estimate that the disposal proceeds would be aboutRM2.1bil based on a conservative assumption of RM30,000/ha and the disposedstake of 95%.
- We are puzzled at the rationale for the disposal of LTH'soil palm estates in Indonesia. Although TH Plantations' balance sheet is smallcurrently, it has always been a subject of discussion that LTH's Indonesianplantation assets would be injected into TH Plantations one day.
- Currently, TH Plantations manages LTH's oil palm estatesin Indonesia. The management fee was about RM25.8mil in FY11, which accountedfor 6% of group turnover.
- It was not disclosed if the TH Plantations would continueto manage the oil palm estates in Indonesia under the new owner. However, wereckon that it would be in the best interest if the new owner if TH Plantationswere to continue. This is due to the large size of the estates, which wouldmake it difficult for the new owner to look for new estate managers and workers.
- Also, we believe that without the management fee, THPlantations' net profit would fall significantly.
- Presently, LTH's plantation landbank in Riau, Indonesiaamount to about 83,878ha. Planted area is roughly 73,514ha. Out of the plantedarea of 73,514ha, approximately 63% of the oil palm trees are between 10 to 19years old while another 28% is between four to nine years old. The balance 8%of the oil palm trees are three years and below.
- We would be seeking more information from TH Plantation'smanagement on the details of the proposed disposal of LTH's oil palm estates inIndonesia. Maintain a BUY on TH Plantations for now.
Marcus Chan
When everyone else is scrambling to buy lands in Indo, TH wants to sell. Fishy
2012-04-03 19:30