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Isa defends Felda’s ‘pricey’ buys

KUALA LUMPUR: Tan Sri Mohd Isa Abdul Samad, who is chairman of both Felda Global Venture Holdings Bhd (FGV) and the Federal Land Development Authority (Felda), yesterday defended two acquisitions that came under scrutiny for being “pricey”.

The two transactions were the RM1.2 billion takeover of Pontian United Plantations Bhd by FGV and the RM496.3 million purchase of London serviced apartments by Felda’s investment unit, Felda Investment Corp (FIC).

In a specially arranged press conference to shed light on the two acquisitions, Isa said the takeover of Pontian was a good deal and was not expensive compared with the deal announced two days ago by IOI Corp Bhd and Unico-Desa Bhd.

According to analysts, the RM1 billion price tag to be paid by IOI for Unico-Desa’s entire equity interest, or RM1.17 per share, equates to about RM79,000 to RM80,000 in enterprise value per hectare. On the other hand, FGV’s acquisition of the entire stake in Pontian at RM140 per share had an estimated enterprise value of RM63,750 per hectare.

FGV president and CEO Mohd Emir Mavani Abdullah said the company’s acquisition of Pontian also came with RM250 million cash. The acquisition will also increase FGV’s existing landbank by 5% to 355,684ha.

Pontian, established in 1952, owns about 40,000 acres (16,187ha) of oil palm land predominantly located in Sabah, and a 90-tonne per hour palm oil mill. Pontian’s average tree age profile is about 13 years old, and the company is expected to produce 80,000 to 85,000 tonnes of crude palm oil (CPO) and 17,000 tonnes of palm kernel per annum.

“So if you calculate it correctly with all these things together, you will see that it is actually a very good deal,” Emir said, adding that the yield of the plantations in Sabah is much higher than the plantations in Peninsular Malaysia.

Meanwhile, FGV highlighted that Pontian owns a 1,626-acre landbank in Kukup, Johor, that is high in value as it is near the Tuas highway that links Johor, as well as Iskandar Malaysia, with Singapore. However, the company said the landbank would remain plantation land for now to support FGV’s core business.

The RM1.2 billion acquisition of Pontian was paid from the proceeds of FGV’s IPO last year. After the acquisition, Emir said the group still had RM2.6 billion left from the IPO and was keen to expand in Asean, namely Indonesia, Vietnam and Myanmar, as well as in Africa.

On Felda’s acquisition of the serviced apartments in London known as The Grand Plaza, Isa said the offer was too good to refuse as it is in a central location in Bayswater, London.

“You can never go wrong with properties in London,” Isa said, adding that the serviced apartments were Felda’s first asset in London, and that the group was “quite lucky” to have purchased it even though it was a latecomer to the London property market.

Isa said the serviced apartments are currently fully booked for the next five months, and FIC expects to enjoy a net yield of £5 million (RM25.8 million) a year from the investment.

The Grand Plaza was sold to FIC UK Properties, a subsidiary of Felda, by Residential Land on Sept 4. It has achieved an average occupancy rate of 90% a month. Felda owns nine other hotels across Malaysia, mostly under the Felda Residences brand name.


This article first appeared in The Edge Financial Daily, on October 04, 2013.

 

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