RM1bil land sale by Sime Darby

PETALING JAYA: Sime Darby Plantation Bhd (SDP) is looking to dispose of over 4,300 acres of freehold estate land in Peninsular Malaysia that is estimated to bring in proceeds of more than RM1bil if it is able to get the price it seeks.

Industry experts generally have pegged the sale price between RM200,000 and RM250,000 per acre, which is described as the higher band of valuation for brownfield plantation land.

“The reserve price is believed to be at an average of RM200,000 per acre, which is on the higher side of recent transactions.

“But if SDP is able to pull it off, it would be commendable,” said a source.

In relation to the disposal, SDP had placed an advertisement last week for the sale of several parcels of oil palm land scattered in Kuala Langat and Klang (Selangor), Sitiawan and Hilir Perak (Perak), Merlimau (Malacca), Kuala Muda and Kulim (Kedah) and Seberang Prai Selatan (Penang).

Of the total 4,377 acres, the largest tracts of land up for sale include the Bukit Hijau Estate- Patani Para (PP-1) and (PP-2) at 1,136.39 acres and 798.89 acres in Kuala Muda, while the smallest land bank is Sg Wangi Estate (SW-1) GRN145377 Lot 40537 at 4.56 acres in Sitiawan.

SDP has also put up a tender notice inviting prospective developers and investors to submit their offers for the respective land banks.

However, the plantation group did not stipulate how much it intends to sell these estates for.

In 2018, plantation companies announced combined merger and acquisition (M&A) deals estimated at RM1.24bil in Malaysia.

Notable M&As last year included United Plantations Bhd’s acquisition of estates in Teluk Intan, Perak for RM414mil or RM120,336 per planted ha from Pinehill Pacific Bhd, and Boustead Plantations Bhd’s disposal of its 138.9ha land in Penang to SP Setia Bhd, which fetched an even higher valuation of RM979,508 per ha.

Early this year, poultry-based Huat Lai Group, which was delisted in 2017, offered to buy United Malacca Bhd’s four oil palm estates in Negri Sembilan and Melaka for RM175mil cash, or equivalent to about RM171,533 per ha.

Generally, brownfield oil palm land in Peninsular Malaysia is about 30% higher in terms of its valuation compared with those in Sabah and Sarawak, said an industry expert.

Reflecting on the latest development, a source told StarBiz that “I believe SDP is disposing of these estates which are ‘ideally located properties’ to prevent the compulsory acquisition by state governments for development”.

“By making this bold move to sell off its non-core and non-strategic land bank, SDP would be able to realise the true market value of these estates.

“Overall, it is a very small area of SDP’s vast total land bank.”

The source added that the potential proceeds from the large-tract land sale could also be the answer to SDP’s plan to raise new money that could be used to pay dividends to its shareholders at a payout rate of 43% to 45%.

The world’s largest oil palm planter by hectarage is also looking to further reduce its gearing ratio, which stood at 40% as at end-June 2018.

Meanwhile, CIMB Investment Bank regional head of plantation research, Ivy Ng, said the huge land bank disposal by SDP this year came as no big surprise as “this is line with the group’s existing plans to sell some of its oil palm land bank to unlock their true value”.

Asked on the estimated combined value of the estates that were up for sale, she said: “I don’t think there is a guidance on this. All will depend on the offers received.”

Late last year, SDP executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh hinted that the group would be looking to divest its non-core assets in 2019.

He was also quoted as saying “there would be certain transactions that would see us disposing of our non-core assets or even parts of existing estates that have been identified for development”.

Of late, planters have opted to buy up brownfield oil palm land given the strict ban on new oil palm land expansion in Malaysia and Indonesia, the rising cost of production, weak crude palm oil prices as well as a lack of interest in greenfield acquisitions.

And more interestingly, more old or abandoned oil palm land, especially those bordering new townships, are being sought after by local property developers.

On Bursa Malaysia yesterday, SDP’s share price closed six sen higher to RM5.08 with 3.06 million shares being done.