The Star Online (31/10/2017) - PETALING JAYA: Boustead Plantations Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png's purchase of of 11,579 hectares of plantation land from DutaLand Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.pngis viewed as an expensive deal because the plantations are not efficient.
 
On paper, Boustead seems to be paying a lower price for the plantations, averaging about RM64,777 per hectare. Other plantation groups have paid higher prices for plantations in Sabah.
 
However, the yields on the DutaLand plantations is not up to the mark – almost 50% lower than the average production per hectare of plantations in Sabah.
 
Even Boustead Plantations' own estates in Sabah has yields of 45%  higher than what is being harvested in DutaLand’s plantations.
 

 Also, some 25% of the trees' age profile is more than 20 years, requiring Boustead Plantations to set aside RM250mil for replanting over the next 10 years.
 
“Boustead Plantations has its work cut out for it when it completes the purchase of the plantations. It will take a few years before the yields can be improved through proper management and adequate fertilisers.
 
“Based on Boustead Plantations' previous experience in managing plantations in Sabah, it will take three years before the yields improve up to the industry benchmark," said an analyst.
 
In terms of pricing per hectare, what Boustead Plantations is proposing to pay for the plantations is much lower.
 
IOI Corp set the benchmark in Sabah when it forked out RM88,252 per hectare for plantations it acquired from Unico Desa Bhd in 2013.
 
IOI Corp had also offered RM69,299 per hectare for DutaLand’s plantations in Sabah in 2011. However, the deal did not materialise.
 
However in terms of efficiency in production, the DutaLand plantations that Boustead Plantations is buying needs some work to be done before the value can be reaped.