14/11/2012 (The Sun) - TH Plantations Bhd (THP), which has obtained all the necessary regulatory approvals to acquire TH Ladang (Sabah & Sarawak) Sdn Bhd and a 70% stake in TH Bakti Sdn Bhd from its parent Lembaga Tabung Haji (LTH), expects to neutralise the dilution to its earnings following the acquisitions in the third year from increased revenue stream, said its CEO Datuk Zainal Azwar Aminuddin.

THP is buying TH Ladang and the stake in TH Bakti for a combined RM535.64 million. The acquisition will be satisfied via the issuance of 209.23 million new THP shares at an issue price of RM2.56 per share.

The proposed acquisitions, which are expected to be completed in 10 days, will see THP's issued share capital increase from 518 million shares to 727 million shares, which would result in an immediate dilutive effect on the group's earnings per share (EPS).

"EPS will be diluted for the first two years. After that, earnings will become better as revenue increases," Zainal told reporters after THP's EGM on Monday.

"From the third year onwards, the dilution will definitely be neutralised or recovered."

He added that in the medium to long term, there will be value creation for THP's shareholders in terms of additional profit and revenue streams.

"With our good landbank acquisition and as age profile of our oil palms becomes better, there will be continued flow of revenue."

The proposed acquisitions will improve the average age of THP's oil palms from 16 years to 14 years.

Post-acquisitions, its oil palms will consist of 45% immature (1 to 3 years), 24% young mature (4 to 9 years), 17% prime mature (10 to 19 years) and 7% mature (20 to 25 years) as well as old mature (over 25 years) respectively.

"As our immature oil palms increases to 45% from 38%, it will provide continuous earnings boost every year," said Zainal.

The proposed acquisitions will also enlarge the group's total plantation land bank by 103% to 91,078ha from 44,933ha currently, and increase its total planted area of oil palms to 53,805ha from 38,154ha.

"For 2013 to 2016, a capital expenditure (capex) of RM725 million is forecast for the planting of oil palm in new areas on 23,000ha of land and for the maintenance of capex for planting development in immature areas," said Zainal.

He also estimates that THP's fresh fruit bunch production will grow at a compound annual growth rate of 15.6% from 2013 to 2016, from 779,965 tonnes to 1.2 million tonnes.

On Monday, THP had obtained approval for the assignment of the sustainable forest management licence agreement to TH-Bonggaya Sdn Bhd -- the final condition precedent in the proposed acquisitions -- following an appeal.

The letter, issued under the Sabah Chief Minister's Department, said it had no objection for the appointment of TH-Bonggaya as the developer, which will see the development of rubber plantation in the forest management unit.

Previously, the Sabah Forestry Department did not accept the proposal.