MARKET DEVELOPMENT
Alliance Research Maintains Neutral On IOI Corp
Alliance Research Maintains Neutral On IOI Corp
03/10/2013 (Bernama) - Alliance Research has maintained a neutral call on IOI Corp Bhd as it views the mandatory general offer (MGO) of the remaining 60.4 per cent stake in Unico-Desa Plantations Bhd amounting to RM1 billion as a pricey acquisition with no immediate earnings accretion.
The plantation giant had acquired 39.55 per cent in Unico-Desa from companies and parties linked to Unico-Desa's major shareholder, Teoh Hock Chai, for RM396.63 million or RM1.17 per Unico share.
IOI Corp has, thus, triggered a MGO for the rest of the 518.11 million shares at the same RM1.17 per share price.
"Assuming full acceptance of the MGO, it will cost RM1 billion, therefore with the transaction priced at 39.7 times historical price earnings ratio and RM79k per planted hectare, we deem the transaction to be pricey, as it is above a recent transaction made by Felda Global Ventures in Sabah.
"Furthermore, earnings contribution from Unico-Desa is expected to be negligible in the immediate term as margin has compressed amid low crude palm oil prices, rising production costs and ageing trees," it said in a research note Thursday.
Unico-Desa has 12,700 ha of planted area located in Lahad Datu and Kinabatangan, while total land bank which includes infrastructure is 13,660 ha, with 28 per cent of Unico's planted hectarage being immature, 49 per cent mature and 23 per cent past prime.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said the acquisition would allow IOI to have immediate access and ownership control in Unico's plantation operations in Sabah, hence bringing synergistic impact to IOI's existing 98,088 ha of planted oil palm estates there.
"Overall, it will result in IOI's plantation landbank increasing by 7.5 per cent to 196,867 ha," the research house said, adding that it recommended a hold rating.
The plantation giant had acquired 39.55 per cent in Unico-Desa from companies and parties linked to Unico-Desa's major shareholder, Teoh Hock Chai, for RM396.63 million or RM1.17 per Unico share.
IOI Corp has, thus, triggered a MGO for the rest of the 518.11 million shares at the same RM1.17 per share price.
"Assuming full acceptance of the MGO, it will cost RM1 billion, therefore with the transaction priced at 39.7 times historical price earnings ratio and RM79k per planted hectare, we deem the transaction to be pricey, as it is above a recent transaction made by Felda Global Ventures in Sabah.
"Furthermore, earnings contribution from Unico-Desa is expected to be negligible in the immediate term as margin has compressed amid low crude palm oil prices, rising production costs and ageing trees," it said in a research note Thursday.
Unico-Desa has 12,700 ha of planted area located in Lahad Datu and Kinabatangan, while total land bank which includes infrastructure is 13,660 ha, with 28 per cent of Unico's planted hectarage being immature, 49 per cent mature and 23 per cent past prime.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said the acquisition would allow IOI to have immediate access and ownership control in Unico's plantation operations in Sabah, hence bringing synergistic impact to IOI's existing 98,088 ha of planted oil palm estates there.
"Overall, it will result in IOI's plantation landbank increasing by 7.5 per cent to 196,867 ha," the research house said, adding that it recommended a hold rating.