Tuesday October 5, 2004 - GOLDEN Hope Plantations Bhd is transformingitself into a more efficient integrated palm oil producer following therecent approval by shareholders of its rationalisation exercise, RHBResearch said in a report.

New group chief executive Datuk Sabri Ahmad's emphasis on raisingoperational efficiency and enhancing shareholders' value through higherreturn on equities and sustainable dividends augurs well in strengtheninginvestors' confidence in the group.

An analyst with a local brokerage said, in the past, the earnings growth(of GHope) had been quite erratic due to the volatility of itsnon-plantation operations, but the streamlining of its core business hasunlocked the value of its non-core property assets and enhancedoperational efficiencies.

The rationalisation exercise with Island & Peninsular Bhd (I&P), aimed atbetter core business segregation among public listed Government-linkedcompanies, received warm reception from shareholders last month.

Post-rationalisation, GHope will emerge as the country's largestplantation player in terms of hectarage (186,184ha) after acquiring 99.63%of Austral Enterprises Bhd from I&P for RM1.25bil, satisfied via theissuance of more than 361.27 million new GHope shares at RM3.46 each.

I&P, in return, will become the largest property owner in Malaysia, itsland bank ballooning to 7,621.2ha after its acquisitions, among otherthings, of GHope's Golden Hope Properties (Johor) Sdn Bhd, Golden HopeProperties Sdn Bhd and Golden Hope Development Sdn Bhd for someRM679.65mil.

An analyst with a local brokerage said GHope, often overlooked by fundmanagers due to perceptions that it was inefficient, had now become astock pick within a sector that offered strong dividend payout, now thatits rationalisation exercise was under way.

Apart from IOI Corp, the best managed plantation company, GHope is nowaccumulated by institutional investors, as the divestment of its non-coreproperty assets and acquisition of younger oil palm hectarages (throughthe rationalisation with I&P) are expected to improve its earningspotential, said the analyst.

The rationalisation exercise will increase GHope's combined CPO productionby 30.5% to 596,783 tonnes, along with a 46.8% rise in matured oil palmarea to 154,961 hectares (see table).

Even without the exercise, GHope has been growing organically through thedynamic leadership of Datuk Sabri Ahmad since Jan 1, resulting from betterimplementation of regularisation policies, higher output of fresh fruitbrunches (FFB) and better oil extraction rate (OER) per hectare, theanalyst said.

The report said the company's OER rose from 20.5% in the financial year(FY) ended June 30, 2002, to 20.98% in FY03 and 21.06% in FY04.

RHB Research remained positive on its growth prospects, and fairly valuedthe stock at RM5.16 per share after the capital distribution following therationalisation exercise.

StarBiz had quoted I&P managing director Dr Radzuan Abdul Rahman as sayingat the company EGM on Sept 28 that he expected the exercise to becompleted by January next year at the latest.

The GHope counter rose for the third consecutive trading day yesterday,gaining 14 sen to RM4.02 on volume of 1.19 million shares, in the processbreaking the RM4 resistance mark that had persisted since May.