Guthrie’s diversification pays off


  • Business
  • Wednesday, 15 Jan 2003

BY HANIM ADNAN

PLANTATION giant Kumpulan Guthrie Bhd has been rewarding its shareholders with reasonable dividends despite being saddled with underlying issues pertaining to the stability of its investments in the 215,000ha Minamas plantations in Indonesia and huge borrowings of about RM2.7bil. 

Somewhat blessed with firm crude palm oil (CPO) prices last year and optimism of a better price outlook this year, and with its Indonesian plantations expected to contribute significantly to future earnings, Guthrie is well on the road to being on a firmer financial footing. 

An investor who had bought one lot of Guthrie shares 13 years ago, would have accumulated dividends of RM1,480 as of end-2002. 

One lot of Guthrie shares bought at RM2.11 apiece in January 1990 was worth RM3,670 (inclusive of total dividends) as of Dec 31 last year. The investor who held on to the shares at the end of last year would have made a net gain of RM1,560. 

The highest gross dividend payouts – ranging from 14 to 16 sen – were during the CPO price rally years, particularly 1997–99. The lowest dividend paid was 9 sen, in 1990, 1993, 1994 and 2002. 

The highly diversified Guthrie has core businesses in plantation, property development and manufacturing. Other businesses include planting materials and agricultural consultancy, furniture and healthcare products, rubber trading, landscaping and computers. The group has land-bank totalling 107,475ha in Malaysia and 215,047ha in Indonesia. 

The 182-year-old group dates back to 1821 when Alexander Guthrie set up the first British East India trading company in Singapore. In 1896 and 1924 Guthrie introduced rubber and oil palm cultivation respectively into then Malaya. 

In the famous “dawn raid” in 1981, Tan Sri Khalid Ibrahim, the then deputy general manager of Permodalan Nasional Bhd, wrested Guthrie from British interests and brought it home. Khalid is currently Guthrie group chief executive officer.Guthrie was made a public company in 1987 and listed on the KLSE in 1989, in what was then the largest public issue of shares in Malaysia. 

Two of its subsidiaries – Highlands & Lowlands Bhd and Guthrie Ropel Bhd – are also listed on the KLSE. Highlands & Lowlands is also listed on the London Stock Exchange. 

It was under the leadership of Khalid, who joined Guthrie in 1994, that the group launched its strategic diversification of core businesses in plantation, property development and manufacturing. 

Other noteworthy events in Guthrie's history include the clinching by its subsidiary, Guthrie Corridor Expressway Sdn Bhd, of a 33-year highway concession in Selangor, now known as the Guthrie Corridor Expressway; and Guthrie acquiring plantation companies with 265,000ha in seven provinces in Indonesia. Both were secured in 2000. 

In 2001, Guthrie acquired 25 oil palm companies under Holdiko Palm Plantations (now known as Minamas Planatation), which has estates in Kalimantan, Sumatra and Sulawesi in Indonesia. The acquisition doubled the group's land-bank and made it a major palm oil producer in the region. 

In the same year, Guthrie issued US$395mil (RM1.5bil) Islamic bonds – the first US dollar denominated international Islamic bonds – tradeable on the Labuan Financial Exchange to finance its Indonesian acquisitions and operations. 

Although most plantation analysts were still “not too hot” about Guthrie – it has been under-performing the KLSE over the years – GK Goh Securities, in a recent note, said: “We expect Guthrie to record better performance due to the higher average CPO price achieved by its plantation division.” 

Going forward, there are potential earnings from the proposed disposal of 426.6 acres of land in Klang for RM115.3mil to WCT Engineering Bhd, and disposals involving its Indonesian plantation companies.  

GK Goh Securities said Guthrie would rake in a one-off gain of RM49mil from the disposal of land and RM688,888 from the sale of the plantation companies. 

Kim Eng Research also agrees that the earnings outlook for Guthrie appears brighter. 

Profits from the plantation division are expected to improve further, driven mainly by rising CPO prices, seen at an average RM1,360 and RM1,620 per tonne respectively in financial years 2002 and 2003. 

The research house recommends a hold on Guthrie. 

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