The deals would allow Oriental to more than double its landbank in Malaysia and take full control over its sizeable plantation landbank, with 4 palm oil mills in Indonesia
by HABHAJAN SINGH / pic source ohb.com.my
ORIENTAL Holdings Bhd’s plans to splurge a total of RM1.2 billion in a series of related party transactions did not bring about much excitement on its stock price. The company’s share price ended next day’s trading up five sen to close at RM6.44 last Friday, giving it a market capitalisation of close to RM4 billion.
Perhaps the investing public simply deemed the slew of deals — involving large tracts of oil palm estates in Malaysia and Indonesia, and some Mauritius-registered entity — as the conglomerate’s attempt to get a firm grip on the ground where it operates.
Still, the announcements were worth noting. On Oct 13, the company had announced plans to purchase remaining stakes in a number of oil palm plantations in Malaysia and Indonesia, as well as shares in plantation companies, for RM1.2 billion.
The deals announced to the local stock exchange would allow Oriental to more than double its landbank in Malaysia and take full control over its sizeable plantation landbank, with four palm oil mills in Indonesia.
Oriental executive chairman and substantial shareholder Datuk Loh Kian Chong and four fellow directors have been deemed as interested directors in the various proposed deals.
The others are Oriental group MDs Datuk Robert Wong and Datuk Seri Lim Su Tong, ED Tan Kheng Hwee and Datuk Seri Tan Hui Jing as well as alternate director Datin Loh Ean.
Kian Chong, grandson of the late Tan Sri Loh Boon Siew, is the nephew of Wong, Loh, Lim and the cousin of Hui Jing and Kheng Hwee.
In the exchange filing, Oriental said it proposed to acquire from Boon Siew Sdn Bhd (BSSB) the 49.5% equity interest it does not own in Selasih Permata Sdn Bhd for RM646.93 million in cash.
It also plans to acquire from BSSB, Boon Siew Development Sdn Bhd and Loh Boon Siew Holdings Sdn Bhd a 60.5% stake in associate company Southern Perak Plantations Sdn Bhd for RM155.33 million in cash.
In another deal, Oriental plans to acquire from BSSB 3.96 million ordinary shares in its existing 50.5% owned subsidiary, Oriental Boon Siew (Mauritius) Pte Ltd, for RM1.
Oriental has also entered into conditional sale and purchase agreements with Boontong Estates Sdn Bhd to acquire a number of oil palm plantation lands, including Bukit Langkap Estate in Penang for RM41 million, Bentong Estate for RM132 million and Thye Group Estate in Kuala Muda, Kedah, for RM224.1 million.
When completed, Oriental said the proposed acquisitions will see the group landbank in Malaysia increase from 4,958ha to approximately 12,054ha, with the new plantation includes a palm oil mill and comprises mostly planted and yielding oil palm trees.
The move will also allow the group to obtain full control over the 96,168ha of plantation landbank in Indonesia, of which approximately 37,214ha have been fully planted with oil palms.
Explaining the rationale of the move, Oriental said its plantation segment will continue as a core and consistent contributor to the financial performance of the group over the medium to long term given the group’s familiarity with the plantation business and the importance of oil palm as not only a food source but also as a key manufacturing input for detergents, cosmetics, biofuels and other products.
For the first half ended June 30, 2022, Oriental posted a net profit of RM404.65 million on a turnover of RM1.88 billion. The revenue was up 13.7% from the same period a year earlier mainly due to the higher contribution from the plantation and investment properties and trading of building material products segments with overall increase in crude palm oil and palm kernel selling prices and higher sales volume from building material products respectively.
- This article first appeared in The Malaysian Reserve weekly print edition