Breakthrough in IOI Corp’s long-standing dispute


Analysts opined that this move will hold potential benefits for the plantation group that will outweigh its losses.

PETALING JAYA: The decision by IOI Corp Bhd to relinquish its IOI Pelita’s 5,000ha of unplanted native customary rights (NCR) land in Sarawak is widely seen as a positive breakthrough in one of the longest running land disputes in the state.

Analysts opined that this move will hold potential benefits for the plantation group that will outweigh its losses.

Last Friday, IOI Corp announced that it has reached a breakthrough in its IOI Pelita land dispute resolution process at a dialogue session held by the Sarawak state government and eight community groups in Miri on March 17.

In resolving the communities’ communal and individual land claims made during the community participatory mapping stage, IOI Pelita offered to relinquish its interest in about 5,000ha of unplanted area out of its total land area of about 9,000ha in Tinjar near Miri.

The Sarawak state government has also made an unprecedented offer to declare the area of 5,000ha as a Native Communal Reserve and subsequently grant the communities communal and individual land titles. This gives better legal rights and protection to the communities than the NCR status.

However, the IOI Pelita’s offer is conditional and subject to final dispute settlement of which the exact terms will be discussed at the upcoming last stage of the resolution process – the negotiation stage, where expert advice will also be offered to the communities.

IOI Corp pointed out that the negotiation stage will commence as soon as the current interstate travel restrictions due to the pandemic are lifted.

According to CGS-CIMB Research, the net carrying value of IOI Pelita’s Tinjar land was about RM6.1mil on June 30,2020, based on information it gathered from IOI Corp’s 2020 Annual Report.

“If the final dispute settlement is reached, IOI Corp may need to write-off the carrying value of this land ofRM6.1mil or 0.5% of its financial year ending June 30,2022 forecast net profit due to its plan to relinquish the land, ” it said.

Despite the potential write-off, the research unit viewed the potential settlement positively from an environmental, social and governance (ESG) standpoint.

CGS-CIMB Research added that it will free up IOI’s management resources that were devoted to settling the IOI Pelita land dispute with local communities in Tinjar.

It has been going on for 14 years with many attempts to resolve it, but they have never succeeded.

This dispute started in 1997, long before IOI Corp entered into the joint venture with the Land Custody and Development Authority of Sarawak in2006.

Once the dispute settlement is carried out, CGS-CIMB Research noted that IOI Corp could gain back full control of around 5,000ha of oil palm estates known as Sejap estates, where the access to the land has been negatively impacted by the Pelita land dispute.

Overall, the research unit viewed the group’s decision to relinquish the said land will have minimal impact on the recurring earnings of IOI Corp.

“In terms of timeline, we estimate the settlement can only be reached in the second half of this year at the earliest due to current interstate travel restrictions, ” it added.

Hence, CGS-CIMB Research has reiterated a hold call on IOI Corp with a target price of RM4.68.

Its down side risk is the lower price of crude palm oil and yields.

Yesterday, IOI Corp’s share price closed 3 sen up at RM4.27 with a market capitalisation of RM26,8bil.

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