Asian Plantations’ palm oil mill in Incosetia estate in Sarawak. Felda Global Ventures will set a new benchmark for Sarawak if its acquisition of Asian Plantations go through
PETALING JAYA: Oil palm estates in Sabah and Sarawak are experiencing new benchmark pricing despite weaker crude palm oil (CPO) prices as cash-rich plantation groups expand their domestic landbanks amid rising policy uncertainties in Indonesia.
Over the past two years, large local planters have acquired over 50,000ha in Sabah and Sarawak at record high enterprise value (EV) per ha, according to industry observers.
The most prominent in the second half of 2013 include the RM2.2bil acquisition of Pontian United Plantations Bhd by Felda Global Ventures Holdings Bhd (FGV), Boustead Holdings Bhd’s RM184.6mil acquisition of Uniglobal Sdn Bhd and IOI Corp Bhd buying over Unico Desa Plantations Bhd for RM1.2bil.
UOBKayHian, in its latest sector update, said IOI Corp in October last year had set a new benchmark pricing for estates in Sabah by paying RM88,252 per ha to take over 13,660ha from Unico Desa.
FGV would also set a new benchmark for oil palm land in Sarawak at RM74,300 per ha for its proposed acquisition of 24,622ha from London-listed Asian Plantations Ltd, it added.
The research unit said investor interest in smallish Malaysian estates was increasing on the back of rising regulatory risk pertaining to land ownership in Indonesia and the need to conform to the stringent sustainability criteria in Africa, thus leading to a more favourable investment climate for Malaysian oil palm plantations.
“Two transactions (FGV’s Pontian United and IOI’s Unico Desa ) have set new benchmark pricing for Sabah and there will be a new record for estates in Sarawak if FGV’s deal to acquire Asian Plantations were to go through.
“These transactions will make some of the Sabah and Sarawak-based planters attractive, with an EV per ha that is below the transacted price,” it added.
Based on the attractive EV per ha below the recent transacted price of RM88,252 per ha, UOBKayHian has identified attractive small and mid-cap listed planters with exposure in Sabah and Sarawak purely based on their asset valuation – Hap Seng Plantations Holdings Bhd, Kretam Holdings Bhd, DutaLand Bhd, Sarawak Plantation Bhd, BLD Plantation Bhd and Sarawak Oil Palms Bhd.
Based on the EV per ha analysis, Sarawak Oil Palms and Hap Seng Plantations are undervalued, trading at a respective RM40,000 and RM53,000 per ha with good production yield.
Hap Seng Plantations also gives decent dividend yields of 4.3%. The research unit pointed out that DutaLand is among the few that might still be keen to dispose its plantation assets in Sabah.
Back in 2011, DutaLand was in talks with IOI Corp for the disposal of its Sandakan estates at RM69,2994 per ha but no deal was concluded.
UOBKayHian noted that volatile crude palm oil prices and rising cost of production were among the key factors why more smallish oil palm planters were willing to sell now.
“Cost of production in Malaysia has been rising fast lately due to the minimum wage and wastage as a result of labour shortage.
The benchmark price for CPO futures had fallen 27% year-to-date at RM2,101 a tonne on Monday.
Source : The Star
