KUCHING: With the acquisition of Unico Desa Plantation Bhd (Unico Desa) for RM397 million or RM1.17 per share by IOI Corporation Bhd (IOI Corp), the plantation landbank for the latter is expected to increase.
Similarly, earnings contribution from Unico Desa is expected to be included into IOI Corp’s financial statements which in turn will benefit IOI Corp in the long run.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a report said the development is positive as it will boost IOI Corp’s plantation landbank by 13,660 hectares to 196,867 hectares.
Kenanga Research analyst Alan Lim Seong Chun said, “We are positive on the deal as IOI Corp’s landbank will be increased. Unico Desa owns 13,660 hectares of plantation estates in Kinabatangan and Lahad Datu in Sabah out of which 12,700 hectares have been planted.
“Unico Desa’s fresh fruit bunches (FFB) yield of 23.8 metric tonnes per hectare is also commendable against the average yield of 20.4 metric tonne in Sabah.
“Synergy can also be realised as both IOI Corp and Unico Desa have landbank in Kinabatangan and Lahad Datu,Sabah. Besides that, IOI Corp has a refinery in Sandakan Sabah which bodes well for the company,” he said.
He added that the takeover offer translated into a price of RM73,400 per hectare.
He noted that the valuation is fair as it was close to the recently completed acquisition of Pontian United Plantations Bhd at around RM75,000 per hectare by Felda Global Ventures Holdings Bhd at similar locations in Kinabatangan and Lahad Datu in Sabah.
On the other hand, the research wing of MIDF Amanah Investment Bank Bhd (MIDF Research) in another report said IOI Corp’s acquisition of Unico Desa is expected to enhance the former’s rate of crude palm oil production.
The research firm said the acquisition is in line with IOI Corp’s plans to expand its oil palm business.
It added that the acquisition will allow IOI Corp to have immediate access and controlling ownership over Unico Desa’s plantation operation in Sabah.
As for the impact to IOI Corp’s balance sheet, Lim said the effect is minimal as he estimated that IOI Corp’s net gearing to be increased to 0.39 times from 0.32 times at present.
MIDF Research noted that the acquisition of the 39.55 per cent stake of Unico Desa by IOI Corp will be funded through internal generated fund.
It observed that as at end of June, IOI Corp’s cash stood at RM878.9 million while the mandatory general offer (MGO) will be funded through the combination of cash and borrowings.
As for financial year 2015 earnings projection, Lim forecasted that IOI Corp’s earnings to go up by 2 per cent to 4 per cent depending on the level of acceptance of the MGO.
He said at the minimum level of 40 per cent acceptance, the research firm expects IOI Corp’s earnings to go up by 2 per cent to RM2.12 billion while earnings could rise up to 4 per cent to RM2.17 billion in the event that IOI Corp obtained 100 per cent acceptance.
Hence, Lim maintained the core net profit forecast for IOI Corp’s financial year 2014 and 2015 of RM1.73 billion and RM2.09 billion respectively.