Acquisition of new estates
- Announced acquisition of planted estates totalling 6k ha in West Kalimantan.
- Deal is worth US$70m, funded by internal resources; translating into US$11.6k/planted ha.
- Immediately earnings accretive, but insignificant.
- HOLD call maintained.
New acquisition.
- First Resources announced overnight that it had acquired 100% share capital of Pacific Agri Resources Pte Ltd, which in turn owns 95% of PT Falcon Agri Persada (Falcon).
- The remaining 5% has also been acquired by First Resources’ indirect subsidiary, PT Pancasurya Agrindo.
About the acquiree.
- Falcon is engaged in the oil palm plantation business in West Kalimantan with total planted hectarage of 6,000 (roughly equally split between mature and immature) with an average age of 3 years.
- We understand that the estates have a leasehold title (HGU) with Plantation Permit (IUP) issued prior to the Ministerial Regulation capping the maximum concession at 100k ha; but do not have smallholders under Plasma programme.
- While there remains unplanted reserve of undisclosed hectarage, the group would need to undertake a closer study to avoid HCS (High Carbon Stock) and HCV (High Conservation Value) areas prior to developing any further, and to comply with regulations requiring any allocation for smallholder estates.
- Falcon will immediately contribute to First Resources’ 3Q15 P&L – although insignificant, given the young age of its trees.
Not cheap, but fairly priced.
- The cash consideration for the acquisitions was c.US$28.6m, while the entire deal was valued at c.US$70m. The acquisition is deemed complete.
- This value translates into an EV/planted ha of US$11,600/ha.
- Relative to First Resources’ own EV/planted ha of c.US$15,700, we believe the price was fair, although we should note that average EV/planted ha valuation of IDX-listed planters under our coverage now stands at US$9,000.
- Through this acquisition, we believe First Resources will expand by more than 10k ha this year; assuming that the group will be able to undertake new planting of 6.5k ha.
Forecasts unchanged.
- Subject to imputation, we are maintaining our forecasts, TP and HOLD rating for the counter.
- We do not anticipate any significant impact.
(Ben SANTOSO)
Source: http://www.dbsvickers.com/
