KUCHING: Sibu-based timber firm Subur Tiasa Holdings Bhd’s oil palm plantation area will rise by 48% to 17,875ha after completing the acquisition of Simunjan Estate located in southern Sarawak.
The company proposed to acquire the estate from Rimbunan Sawit Bhd for RM150mil cash.
Shareholders will vote on the proposed acquisition in an EGM on July 14.
Of the amount, RM120mil will be from bank borrowings and the balance from internally generated funds. Subur Tiasa and Rimbunan Sawit have common major shareholders, being under the stable of the Rimbunan Hijau group.
The Simunjan Estate currently has some 5,775ha of oil palm trees aged mostly between four and 10 years out of a gross licensed area of 15,017ha. In financial year ended Dec 31, 2016,the estate produced some 31,511 tonnes of fresh fruit bunches (FFB) and generated a revenue of RM14.8mil.
According to Subur Tiasa senior independent director Ngu Ying Ping, the company plans to plant commercial tree species on some 5,000ha of the estate that has remained unplanted.
She said this would provide long-term supply of logs for the company’s downstream timber operation.
Ngu said the company would commence the tree planting activities between 2019 and 2032, with the trees expected to be ready for harvesting by 2026.
Ngu said the company would evaluate the business model and growth prospects for the estate as the land-tenure expires in 2029. She added that the company may seek a renewal of the oil palm plantation licence to expand the oil palm plantation operation or venture into plantation of trees that would complement its timber operation.
She explained that the estate’s licence for planted forest permits the planting of oil palm trees for up to 25 years, after which the existing oil palm trees can be replaced with other trees.
“By 2029, almost 35.8% of the oil palm on the Simunjan Estate will be over 19 years old and due for replanting while the remaining 64.2% is mostly in late mature category (aged 16-18).
“The cessation of the oil palm in Simunjan Estate will scale down the group’s oil palm planted land bank by 5,775ha while the tree plantation area will increase by the said 5,775ha.
“The impact to oil palm plantation will be compensated by the existing oil palm estate which will be in the prime and mature category then. In addition, the group is expected to have enlarged planted land bank of 45,000ha in mature category in 2029,” Ngu said in a circular to shareholders.
Upon completion of the proposed acquisition, expected by October, Subur Tiasa’s total plantation land bank will increase to some 43,760ha from 28,743ha.
According to Ngu, the company expects to incur up to RM13mil for plantation improvement and RM10mil more for the acquisition of plantation machinery and equipment over the next five years.
“As the Simunjan Estate contains both planted and unplanted areas, the group is expected to incur additional financial commitments for the continuing maintenance of the oil palm estate as well as the planting of new trees upon completion of the proposed acquisition,” she added.
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