Ta Ann’s acquisition of Agrogreen will expand planted area and raise gearing level

KUALA LUMPUR: The proposed entire acquisition of Agrogreen Ventures Sdn Bhd by Ta Ann Holdings for RM211mil cash will expand the latter’s planted area and raise its net gearing.

PublicInvest Research said on Tuesday the acquisition would help expand its planted area by 12.3% to 46,231ha, adding that it would continue to rate Ta Ann with an outperform call and unchanged target price of RM4.42. 

At current level, the research house said dividend yield remains attractive at around 4%. Ta Ann has proposed to acquire a 100% stake in Agrogreen Ventures, which owns 5,279.8ha in Sarawak for a total cash consideration of RM211m or RM39,963 per ha, which the brokerage deem reasonable considering that majority of the area is fully planted and young age profile.

“The acquisition will raise the company’s net gearing from 10.8% in financial year 2015 (FY 15) to 28.1% upon acquisition, which is relatively low given that majority of its landbank is almost fully planted. As not many new planting activities carried out going forward, we estimate that capital expenditure (capex) will drop more than 50% to about RM55mil  in FY 16,’’ it noted.

Ta Ann would acquire Agrogreen Ventures from different parties and the acquisition is not subject to the approvals of the shareholders of the company or any governmental or
statutory bodies. It is expected to be completed by the first half of next year. 

Agrogreen Ventures owns 5,280ha in Lundu, Sarawak, of which over 5,090ha has been planted with oil palms aged from one to five years. It is a 60-year leasehold land with an estimated
age profile of three years old. 

Ta Ann plans to fund the acquisition with internally generated funds and partially by bank borrowings. Given its current cash level of RM304mil, PublicInvest think that there is no issue if the company plans to undertake the acquisition via its internally generated funds.

The research outfit added that since Agrogreen is currently involved in the native customary rights lawsuit case, it was of the view that any unfavourable judgment from the court would result in a delay in the acquisition.