News IOI Corporation (IOICORP) announced that the Group has received in total, valid acceptances of 94.79% of Unico-Desa Plantations (UNICO) shares when the offer period was closed on 16-Dec-2013. Since the valid acceptance exceeded 90%, IOICORP will compulsorily acquire the remaining shares within two months’ time.
Recall that on 2-Oct-2013, IOICORP has announced the acquisition of 339m shares (or 39.55%) of UNICO for RM397m or RM1.17 per share. Subsequently, IOICORP made a mandatory take-over offer (MGO) to acquire the remaining 518.1m of UNICO shares (or the balance 60.45%) at the same offer price of RM1.17 per share.
Note that UNICO owns 13,660 hectares of plantation estates (planted: 12,700 ha) in Kinabatangan and Lahad Datu, Sabah.
Comments We are positive on the deal as IOICORP’s earnings should benefit due to increased mature plantation landbank owned by UNICO. We think the valuation of the deal at RM73,400/ha is fair as it is comparable to valuations of between RM75,000 – RM80,000 per ha for matured Sabah plantation estates.
The successful acquisition would increase IOICORP’s landbank by 13,660 ha (or 7.5%) to 196,867ha. UNICO's FFB yield of 23.8 MT/ha is also commendable against the average yield of 20.4 MT/ha in Sabah. Synergy can also be realized as both IOICORP and UNICO have landbanks in Kinabatangan and Lahad Datu, Sabah.
Outlook We are positive on the news as it should bode well for IOICORP’s long-term FFB growth.
Forecast FY14E’s core earning is increased by 2% to RM1.81b after assuming Unico’s contribution from 2HFY14 onwards. FY15E core earning is increased by 5% to RM2.24b on the full impact from UNICO.
Rating Maintain OUTPERFORM
We believe IOICORP is due for a re-rating post the demerger with IOI Properties as it is poised to regain its status as a big-cap pure planter listed in Malaysia.
Valuation We increase our Target Price to RM6.70 (from RM6.50) based on an unchanged Fwd. PER of 21.2x on higher CY14E EPS of 31.7 sen (from 30.7sen).
Risks to Our Call Lower than expected CPO prices.
Lower than expected margin for downstream division.
Chart | Stock Name | Last | Change | Volume |
---|