Acquisition of IJM Plantations seen at RM2.1bil to RM3.1bil
PETALING JAYA: The potential acquisition of IJM Plantations Bhd by either IOI Corp Bhd or Hap Seng Plantations Holdings Bhd will springboard the acquirer’s planted land bank size by leaps and bounds, PublicInvest Research said in a report.
If the acquisition were to take place, the offer price for IJM Plantations could be in the range of RM2.1bil to RM3.1bil, it said.
“The targeted company, which has a market capitalisation of RM2bil, is easier for IOI Corp to swallow than Hap Seng Plantations,” the research report said.
StarBiz reported on Tuesday, quoting sources, that IJM Plantations was a target acquisition company by either IOI Corp or Hap Seng.
Following that report, PublicInvest Research said the deal could be IOI Corp’s first upstream acquisition since the deal with Duta Land collapsed in 2011.
“Assuming IJM Plantation acquisition materialises, it could propel IOI Corp’s land size by 35% to 235,377ha.
“While for Hap Seng, the potential acquisi- tion could nearly triple its planted land bank to 97,084ha, from 36,103ha,” the research house said.
It noted that IOI Corp has a strong cash pile of RM3.7bil with a low net gearing level of 25.3% following the disposal of 70% stake in refinery arm, IOI Loders to Bunge, last year.
Hap Seng, however, has smaller coffers with a cash level of RM65mil but zero gearing.
“Both suitors have strong presence in Sabah, and could see the synergy in the Sabah brownfield plantation asset,” it said.
IJM Plantations has 60,981ha of plantation land in Sabah, Kalimantan and Sumatra.
PublicInvest Research said IJM Plantation major shareholders’ intention to dispose of its 55% stake was because the shareholders believed the plantation business has not been valued “fairly”.
“We think that the potential acquisition is unlikely to be earnings accretive for both suitors in the near term, given the current poor crude palm oil price performance.
“Pending further updates on the potential acquisition, we maintain our target price of RM4.65 with a ‘neutral’ call,” the research house said.
“Assuming we attach an enterprise value (EV) to planted area of RM40,000 for its 35,978ha planted area in Indonesia and EV/ planted area of RM70,000 for its 25,002ha in Malaysia, it is worth a whopping deal of RM3.1bil, which is 47% higher than the recent closing market capitalisation of RM2.1bil,” it added.
However, the brokerage noted that given the current weak crude palm oil price sentiment, there could be a significant discount depending on the bargaining power for IJM Corp and the interested parties.
IJM Plantations is the seventh largest Malaysian plantation company with a total planted area of 60,981ha in Sabah and Indonesia. It is 55%-owned by IJM Corp Bhd, another listed entity.
PublicInvest Research noted that the company has a solid balance sheet with a low net gearing level of 31.8% while its net book value stood at RM1.6bil.
In another development, IJM Corp Bhd told Bursa Malaysia that IJM Land Bhd and Aseania Development Sdn Bhd had mutually agreed to terminate the share sale agreement dated July 11, 2017 relating to the purchase of the entire issued shares of Giant Hectares Sdn Bhd comprising 250,000 ordinary shares.
Both suitors have strong presence in Sabah, and could see the synergy in the Sabah brownfield plantation asset. PublicInvest Research