Small Acquisition at Fair Price
- Acquires 6k ha of young planted nucleus area in West Kalimantan for USD11,000 EV/ planted ha. Fair price, in our view.
- Expect no near-term EPS accretion.
- Maintain BUY & SGD2.22 TP on 13x 2016 P/E pending 2Q15 results. We earlier expected catalysts from 3-year forward 12% FFB CAGR.
What’s New
- FR has acquired 100% of Pacific Agri Resources Pte Ltd from a third party for USD28.6m cash. Pacific Agri owns 95% of PT Falcon Agri Persada, a private oil-palm planter in West Kalimantan.
- We understand that PT Falcon has c.6,000 ha of planted nucleus area with a weighted average tree age of 3.3 years old. Its estates are almost evenly split between mature and immature planted areas.
What’s Our View
- We are generally positive on this. The price and plantation size are small relative to FR’s USD2b assets and 166,000 ha of planted nucleus area.
- Details are limited, but we understand that the purchase consideration was around USD11,000 EV/planted ha, a price we deem fair against recent market transactions.
- The acquisition will be funded by internal resources.
- Net gearing was low at 17% as at 31 Mar 2015.
- Still, given PT Falcon’s young estates, we believe they will not add much to EPS after borrowing costs in the next 2 -3 years, until the trees reach prime maturity in 4-5 years’ time.
- FR has another 47,200 ha of oil-palm planted area in West Kalimantan.
- We see scope for more effective and efficient management with greater economies of scale.
- Our BUY call and TP of SGD2.22 on 13x 2016 P/E are unchanged, pending the release of 2Q15 results.
(Ong Chee Ting, CA)
Source: http://www.maybank-ke.com.sg
