Southern Acids to unlock value of land in Kota Kemuning

SUBANG: Southern Acids (M) Bhd (SAB) is set to unlock its holding of 644.49 acres of land bordering Kota Kemuning, Shah Alam, although its board of directors are still exploring its options.

“There are plans to unlock the value but the board has not decided what to do. Nothing is finalised yet,” said SAB chairman Tan Sri Low Boon Eng when met after the company’s 29th AGM yesterday.

Low said while there is “no shortage of suitors” for the land known as Thangamallay Estate, which is home to its palm oil plantation, he stressed the board is evaluating all available options before making any decision in the next three to six months.

According to a market observer, the freehold land in that area is worth more than RM20 per sq ft. Based on a rough calculation of RM20 per sq ft, the value of this plot alone is estimated at RM561 million, which is more than SAB’s current market capitalisation of RM376.57 million. The company is also cash rich. As at July 31, 2010, it had RM78.69 million in cash and no debts.

SAB’s financial performance for FY April 2010 improved considerably from a year earlier. The company’s pre-tax profit surged 611% from RM4.3 million in FY09 to RM30.7 million in FY10. Its net profit improved by 397% to RM11.6 million compared to after-tax loss of RM3.9 million in FY09.

The company’s revenue also increased, although more marginally, from RM441.9 million in FY09 to RM453.2 million in FY10.

Going forward, Low said the company would be concentrating on its basic core businesses, which are oleochemicals, plantations, logistics and healthcare. The group will be scaling down on the property division, which was initiated by the previous management.

“We are going to concentrate on what we know best,” he added.

On the plantation sector, Low said there are plans to more than double its current land bank in Sumatra. SAB currently owns two plantations — PT Mustika Agro Sari and PT Wanasari Nusantara — with a combined land area totalling 19,674 acres.

Pressed on the targeted amount of land that SAB plans to acquire, Low only said: “We are looking earnestly at enlarging the land bank in Sumatra.” He also revealed the Indonesian plantations will undergo restructuring soon. “The Indonesian operations would take a couple of years to show results,” he added.

In the pipeline is the expansion of its oleochemical plant, which could produce 100,000 metric tonnes annually. According to Low, its current plant in Kapar is running at full capacity.

“We are looking for the opportunity to expand,” he added but declined to reveal more details.

Asked if SAB had a dividend policy, Low said there isn’t one currently as the group never had one before.

“We will establish a dividend policy in the next one to two years once the structures are ready. We need to know how much income will be coming in and how much our expenditure is. Only then can we put in the dividend policy,” he explained.

Presently the annual dividend per share for SAB ranges from four sen to five sen. A a final tax-exempted dividend of six sen was declared for FY2010 ended April 30.

On its capital expansion, Low said “a few hundred million” would be spent in the next two years.

He is also confident that the result for the current financial year will be good due to firm crude palm oil prices.

SAB’s shares rose eight sen to close at RM2.75 on volume of 277,600 shares yesterday. The stock is trading below its latest net assets per share of RM2.88.

This article appeared in The Edge Financial Daily, October 29, 2010.