BOUSTEAD PLANTATIONS BHD
By Maybank IB Research Hold (maintained) Target price: RM1.78
MAYBANK IB Research is positive on Boustead Plantations Bhd’s move to sell its land in Penang, as the cash proceeds will be principally used for the company’s debt repayment.
Boustead Plantations will be selling the land for RM136mil cash, marginally above market value. The plantation company stands to net a disposal gain of RM115.9mil, according to Maybank IB Research.
“Most of this cash proceeds will be used to repay debt, enabling Boustead Plantations to re-gear for the RM750mil capital expenditure committed to acquire Dutaland Bhd estates.
“More land disposals are required if Boustead Plantations plans to sustain its financial year 2017 (FY17) high dividend payouts. We are keeping our earnings and dividend forecasts for now, pending an update,” said the research house in a note.
Recently, Boustead Plantations has entered into two sales and purchase agreements to sell a combined 138.89 ha freehold land (which form part of the Malakoff Estate) in Seberang Perai Utara, Penang.
The company rationalises that the move will unlock the value of this strategic land, and the cash proceeds will be principally used for debt repayment.
The disposal, which is subject to the approvals from Estate Land Board and the Economic Planning Unit, is expected to be completed by the third quarter of this year.
Boustead Plantations does not require its shareholders’ approval for the land sale.
Following the completion of the sale, Boustead Plantations will continue to own and operate its plantation business on the remaining 562.33 ha of Malakoff Estate.
“We estimate the disposal price will translate to an enterprise value of RM979,508 per ha or RM9.10 per sq ft.
“The disposal price is 3.8% higher than the market value as appraised by Messrs John Lang Wootton, which is an independent valuer,” said the research firm.
Maybank IB Research has maintained its “hold” call on Boustead Plantations for its high yield prospects. The target price is left untouched at RM1.78.