KUALA LUMPUR: Boustead Plantations Bhd (BPB) plans to dispose of five parcels of its land totalling 664 hectares (ha) in Kulai, Johor for RM429 million.
The company signed a sale and purchase agreement (SPA) with SIPP Power Sdn Bhd (SIPP Power) for the disposal, part of the rebalancing efforts of its asset portfolio.
BPB is expected to realise a total estimated gain of RM323 million upon completion of the disposal.
This will translate into a gain of approximately RM486,400 per ha, which will increase value for its shareholders by about 14 sen per share.
BPB said the sale price was reached on a willing-seller-willing-buyer basis based on a market valuation by an independent professional valuer.
“It is approximately 10 per cent or RM39 million higher than the market value of the land of RM390 million accorded by the valuer, Messrs. C H Williams Talhar & Wong Sdn Bhd.
“The valuer has adopted the comparison approach of valuation in arriving at the market value of Kulai Young Estate that is based on agricultural land with development potential,” it said.
BPB chief executive officer Zainal Abidin Shariff said in line with Reinventing Boustead strategy, this is an ideal opportunity for BPB to monetise this asset.
Zainal said the plan is beneficial for the company, as it can unlock the asset value, and the proceeds will be utilised to pare down borrowings and meet our working capital requirements.
“Given its strategic location, easy accessibility and development potential, BPB can dispose of the land at a substantial premium over the net book value.
“The proceeds from the proposed disposal will allow us to strengthen the balance sheet for future growth and manage our gearing by way of paring down borrowings, reducing the company’s gearing ratio from 0.48 times to 0.31 times,” he said.
Following the repayment of borrowings, BPB is expected to save an interest cost of approximately RM15 million per annum.
BPB also strengthened its relationship with SIPP Power by securing a five-year Plantation Management Agency Agreement, contributing to its earnings.
SIPP Power, a 70 per cent subsidiary of YTL Power International Bhd (YTL Power), intends to develop the land into a large-scale solar power facility with a generation capacity of up to 500 megawatts (MW).
This is in line with YTL Power’s shift towards investing in more sustainable, renewable energy solutions moving forward.
YTL Power managing director Datuk Yeoh Seok Hong said the company has been seeking opportunities to invest in renewable energy sources, and solar is a priority as the country has substantial solar capacity.
“The acquisition of the Kulai Young Estate is therefore extremely strategic to us with its accessibility and proximity to high growth industrial developments,” said Yeoh.
The disposal is targeted for completion by the fourth quarter of 2021 and is subject to conditions precedents, amongst them, obtaining the necessary approvals from the Estate Land Board and the Economic Planning Unit.