PLANTATION groups Tradewinds Bhd and Johore Tenggara Oil Palm Bhd (JTop) have appointed a merchant bank to devise a scheme to merge their oil palm plantations.
Tradewinds and JTop said in separate announcements yesterday that they had appointed Commerce International Merchant Bankers Bhd (CIMB) to conduct the study. They will make a further announcement after the respective boards of directors have considered the CIMB report.
The possibility of such comes as no surprise, as there has been talk of this in the market for some time.
It is seen as a rational move as both companies are said to be controlled by associates of Tan Sri Syed Mokhtar Al-Bukhari.
There is, however, a third-party substantial shareholder in Tradewinds. The Kuok group is understood to have a stake of about 20% in Tradewinds.
“They need the Kuok group to go along with the merger. But the Kuok group is also a business rival of theirs in the sugar refining business,” an analyst close to the group said.
Mokhtar has refining interests in Tradewinds and his private companies, while the Kuok group's Perlis Plantations Bhd is also engaged in sugar refining.
“Tradewinds and JTop appointed CIMB as a neutral party to advise both of them,” the analyst said.
The initial impression is that of the two, Tradewinds is by far the more attractive company.
Tradewinds has just reported a strong surge in pre-tax profit, but a tax charge brought net profit to just RM21.4mil for 2003, some 28% lower than in the previous year. Even so, it raised its final dividend to 10% gross from 6% in 2002.
JTop, by contrast, has reported a loss of RM1.3mil for its fourth quarter ended Dec 31, 2003. The analyst pointed out, however, that for the year as a whole, JTop's profit rose to RM9.2mil from just RM3mil in 2002. He expects further growth this year.
JTop's fourth-quarter loss was due to heavy replanting costs in the second half last year. Its new management started a five-year programme in 2001 to replace old trees, replanting about 10% of the acreage a year, as opposed to a normal rate of 4%.
JTop brings sound assets to the table: 80,000 acres of state land with good soil at a low price – less than RM5,000 an acre – based on its market capitalisation, the analyst said.
Trading in Tradewinds and JTop shares will resume today.
Did you find this article insightful?