The whole deal is estimated to cost the company RM2.7b and once successful, KLK’s total oil palm planted will rise by 29%

by NUR HANANI AZMAN / Pic by TMR GRAPHIC

KUALA Lumpur Kepong Bhd (KLK) has made an unconditional mandatory takeover offer to acquire all the remaining ordinary shares in IJM Plantations Bhd after IJM Corp Bhd shareholders agreed to the sale of its stake in the Sabah based planter to the former.

KLK tabled a RM3.10 a share bid for IJM Corp’s 56.2% stake in IJM Plantation for RM1.53 billion cash, which has been accepted by IJM Corp shareholders recently in an EGM.

Quarry Lane Sdn Bhd, an indirect wholly-owned subsidiary of KLK, has now made the same offer for the remaining shares to other IJM Plantation shareholders for the same price as required under the rules on take-overs, mergers and compulsory acquisitions.

Kenanga Research believes there are synergies to be gained from the deal as both IJM Plantations and KLK have operations in Sabah, East Kalimantan and Sumatra.

The whole deal is estimated to cost KLK RM2.7 billion, which would increase its net gearing to 0.42 times from 0.23 times with a 30:70 debt-equity ratio.

Kenanga estimates if the offer succeeds, KLK’s total oil palm planted would rise by 29% to 274,000ha, its financial year 2022 (FY22) fresh fruit bunch output to jump by 26% to 5.4 million tonnes and FY22 estimate core net profit rise by 9%.

IJM Plantations is the seventh-largest plantation company in the country with a total planted area of 60,981ha, mainly located in Sabah and Indonesia, while KLK is the country’s third-largest oil palm plantation company with a total land size of 275,000ha spreading across Malaysia (Peninsular and Sabah), Indonesia (Belitung Island, Sumatra, Central and East Kalimantan) and Liberia, after Sime Darby Plantations Bhd and FGV Holdings Bhd.

In terms of geographical distribution, 54% of the KLK’s plantation land bank is located in Indonesia, 43% in Malaysia and 3% in Liberia.

Oil palm is the predominant crop covering 95% of its planted acreage with rubber covering the remaining 5%.

In 2018, KLK acquired a 95% stake in an Indonesian oil palm company, PT Putra Bongan Jaya, which has plantations in East Kalimantan, for about RM300 million. KLK has been on an acquisition spree over the last few years. In August 2020, KLK’s indirect unit Taiko Plantations Pte Ltd acquired TSH Resources Bhd’s Indonesian subsidiaries for US$109.23 million (RM454.08 million).

KLK’s net profit for the third quarter ended June 30, 2021 (3Q21), more than doubled to RM783.94 million from RM368.7 million in 3Q20, mainly due to a fair value surplus on the deemed disposal of an associate company.

Quarterly revenue rose 39.38% year-on-year (YoY) to RM5.17 billion underpinned by its plantation segment.

The group’s plantation segment reported a substantially higher profit of RM432.6 million in 3Q21 versus RM229.4 million in 3Q20, due to higher crude palm oil and palm kernel selling prices.

For the nine months ended June 30, 2021 (9M21), KLK’s net profit jumped three-fold to RM1.63 billion, from RM563.79 million in 9M20 while revenue climbed 20.61% YoY to RM13.98 billion.

IJM Plantations’ earnings for the 1Q ended June 30 fell 26.86% YoY to RM60.06 million on lower foreign exchange gains and higher operating expenses. Its revenue for the period stood at RM271.7 million versus RM206 million in 1Q21.