PAHANG-based plantation player Tanah Makmur Bhd, which took over plantation outfit Kurnia Setia Bhd four years ago, is set to make its debut on the Main Market of Bursa Malaysia.

The company is seeking a listing as a plantation and property player as opposed to Kurnia Setia that was a pure plantation outfit.

Tanah Makmur managing director Tengku Datuk Zubir Tengku Datuk Ubaidillah says that after having taken Kurnia Setia private, they had expanded the business.

“When we took the company private in November 2010, we diversified our business from being mainly an upstream plantation player into downstream, and also ventured into property development,” he tells StarBizWeek in an interview.

At present, the company has 17,829.9ha of plantation land in Pahang, a palm oil mill with a processing capacity of 30 tonnes per hour of fresh fruit bunches (FFB) and a township development on a 607ha parcel near Kuantan.

Tengku Zubir says among the reasons why Kurnia Setia was taken private was because the company was a thinly traded counter and an illiquid stock.

At the time, Kurnia Setia was purely an oil palm planter with 14,428ha of land and was in the early stages of its property development project.

Kurnia Setia was taken private by the Pahang royal family via TAS Group, along with the Pahang Agriculture Development Board (LKPP) via special-purpose vehicle Kreatif Selaras Sdn Bhd for RM2.70 a share and RM1.20 per warrant. Kreatif Selaras was subsequently renamed as Tanah Makmur.

The company was initially listed by LKPP on the Bumiputra Stock Exchange in December 1984, before being listed on the Main Market of Bursa Malaysia in November 1991.

Tengku Zubir has been with the company since 2005 when the Pahang royal family acquired a block of shares in the company from LKPP, taking over the helm as managing director in November 2008.

Tanah Makmur is seeking to be listed next month and is launching its prospectus on Thursday. Tengku Zubir says the company has yet to determine the initial public offering (IPO) price.

According to the draft prospectus, the listing will see Tanah Makmur issuing 101.59 million IPO shares, representing 25.51% of its enlarged issued and paid-up share capital.

The IPO entails a public issue of 52.14 million shares, with proceeds going for estate development, expand its current palm oil mill capacity and repay bank borrowings.

Of the 52.14 million shares, 20 million have been earmarked for the Malaysian public, 6.41 million for eligible staff and 25.73 million for Malaysian institutional and selected investors.

The remaining 49.45 million shares, meanwhile, will be under the offer for sale portion, with the proceeds going to its selling shareholders.

The promoters will hold a combined 46% in the company post-listing.

Also, post-listing, Tengku Zubir says Tanah Makmur will continue to focus on the business of cultivating oil palm.

The company has identified two parcels of land totalling 2,650ha in Pahang.

“We are currently working with the LKPP to secure the land from the Pahang State Government for an estimated cost of RM10mil,” says Tengku Zubir.

“We will also be looking to increase our landbank for oil palm plantations, as well as upgrading our mill capacity and continuing to launch more property projects post-listing,” he elaborates.

He says the company is planning to expand the capacity of its current mill to 45 tonnes per hour from 30 tonnes currently.

 

Property play

Following in the footsteps of other plantation giants such as IOI Corp Bhd and Sime Darby Bhd, Tanah Makmur has also diversified into property development in Kuantan via property arm KotaSAS Sdn Bhd.

Its maiden project, the Kota Sri Ahmad Shah (KotaSAS) township, is located on its former oil palm plantation in Indera Mahkota on 607ha.

Tengku Zubir says KotaSAS had a 9% share of the Kuantan property market in 2012 and the group will not shy away from opportunities to acquire land in the Klang Valley for future property development.

“If there’s an opportunity to acquire parcels of land in the Klang Valley, yes definitely,” he says.

However, Tengku Zubir points out that for now, the group will be focusing on the development of KotaSAS as it is not in the business to acquire land to develop property.

Its property segment currently contributes about 30% to its earnings, compared with just 2.7% in 2010.

According to Tanah Makmur’s draft prospectus, its property development business was the second largest revenue generator for the financial year 2012 with RM72.6mil as the group focused on selling its lower-priced units that year.

On its future projects, Tengku Zubir says the company plans to launch commercial properties, which include government and private offices, retail malls and office suites in KotaSAS.

 

Timely listing?

With crude palm oil (CPO) prices currently on the downtrend, one can’t help but ask if the timing is right to list the company.

Analysts say that despite the current downtrend in CPO prices, they are nevertheless positive, as they expect prices to recover later this year, supported by improvements in the global economy and the return of the El Nino phenomenon.

“Overall, 2014 is a better year for plantation companies to list compared with last year, mainly due to higher CPO prices which will offset market sentiment on the plantation counters,” an analyst opines.

Another plantation player, Boustead Plantations Bhd, is slated for a listing on Thursday.

Analysts believe the listing of Tanah Makmur is, in fact, timely.

In terms of the company’s tree-age profile, its matured oil palm trees are aged between four and 18 years and cover almost 50% of its planted area of 15,652ha. Trees under three years comprise 31%, while those above 19 years make up 18.7% in November 2013.

Tanah Makmur’s FFB yields had improved from 20.21 tonne per ha in 2010 to 22.07 tonne/ha in 2012, which is above the national average and the Pahang state’s FFB yields of 18.89 tonne/ha and 18.94 tonne/ha, respectively.

Further, its oil extraction rate from FFB to CPO stood at 20.59% as at July 2013, slightly higher than the Malaysian Palm Oil Board and Pahang state’s benchmarks.

Pre-privatisation, the group posted a revenue of RM165.38mil for its financial year ended Dec 31, 2010 (FY10), which has since climbed significantly to RM243.49mil in FY13.

However, its net profit was lower at RM44.69mil in FY13 from RM54.52mil in FY10. 

The company posted its highest net profit of RM85.38mil in FY11. 

Tanah Makmur is sitting on a cash pile of RM44.09mil, with a gearing of up to 0.18 times.