11/09/06 (The Star)  -  Analysts describe Guthrie as Malaysia's biggest plantation group in terms of land bank size – bigger than other plantation giants like Golden Hope Plantations Bhd, IOI Corp Bhd, Kuala Lumpur Kepong Bhd and even Indonesia's PT Sinar. 

Avenue Securities, which has an “outperform” on Guthrie, believes that the group is ready to push into higher gear to improve profitability.

After more than five years since its “controversial” expansion into oil palm plantations in Indonesia, the brokerage expects positive news flow over the next 12 months.

This is especially with regards to its revamp, which would provide the much-needed catalyst to boost sentiment on the laggard stock. 

Avenue Securities said there was room for improvement, particularly in efficiency. 

Analysts concur that despite Guthrie's huge plantation land bank, its operating efficiency was still well below the industry's average.

Last year, the group's oil extraction rate (OER) was 20.4% and fresh fruit bunch (FFB) yield was 17.3 tonnes per ha compared with Malaysia's average of 22% in OER and 20 tonnes per ha in FFB. 

The lower efficiency level was mainly due to the larger percentage of young plantations in Indonesia which comprise about 60% of total hectarage.

Avenue Securities said Guthrie's Indonesian FFB yield was expected to rise to between 20% and 30% over the next two years.

“We believe that this is achievable, given the maturity of its Indonesia hectarage, currently at its prime or approaching its prime period. This compares favourably to the Malaysian estates, which are still relatively young.

“Efficiency of the group's Indonesian operations has improved significantly,” the brokerage said. 

An analyst noted that Guthrie plan to list its Minamas plantation over the next 18 months and sale of Guthrie Corridor Expressway to potentially raise about RM1bil, thus reducing its net gearing level from 49%, as at March 31, to less than 30%.