Greenyield’s Papua New Guinea acquisition explained


Greenyield, which owns rubber plantations in Kelantan, also provides agricultural solutions as well as produces specialised plant pots that are largely exported. It was first listed on Mesdaq (now known as the ACE Market) in 2006 and subsequently migrated to the main board in 2012.

LOW-profile Greenyield Bhd recently made news when it proposed a related party transaction (RPT) that would see it fork out around RM88mil for more plantation land in far flung Papua New Guinea (PNG).

Greenyield, which owns rubber plantations in Kelantan, also provides agricultural solutions as well as produces specialised plant pots that are largely exported. It was first listed on Mesdaq (now known as the ACE Market) in 2006 and subsequently migrated to the main board in 2012.

Three months ago, Greenyield, which is owned by the Tham family, announced a plan to acquire a 65% stake in Greenyield Rubber Holdings (M) Ltd (GRHM). GRHM, which is majority owned by the Tham family, owns more than 15,300 ha of plantation assets of rubber, coconut and teak in PNG. The size of that land is about one-fifth the size of Singapore. The estimated price for the stake purchase is RM88mil.

Greenyield will pay for that via RM3mil in cash and the balance via the issuance of shares and irredeemable convertible preference shares (ICPS).

There will be an issuance of 226.05 million new shares and 66.4 million ICPS to the shareholders of GHRM.

As a result of these share issuances, there will be a dilution to the shareholding of Greenyield.

The Tham family will see their shareholding eventually rise to 64.8% from 60.2% currently following the completion of the deal and certain milestones met, while another new unrelated shareholder called Premium Commodities, will emerge as a new substantial shareholder of Greenyield with 5.7%.

Greenyield is making the acquisition to grow its upstream plantation business and to diversify into other other crops.

Other Bursa Malaysia-listed companies in plantations which are palm oil focused have made inroads to diversify into other crops.

IOI Corp has been planting pineapples, coconut, bananas and kenaf in the last two years.

United Malacca Bhd has diversified into stevia, coconut and cocoa in Indonesia while United Plantations Bhd has expanded into banana and coconut plantations. FGV Holdings Bhd is going big into pineapple cultivation and dairy farming.

Greenyield’s executive director Tham Kin On, points out that the PNG plantation business will have sufficient cash flows for expansion. He says the planting of new rubber and coconut trees would be funded through the sale of existing old rubber and teak trees.

“The rubber trees in PNG are already producing about 2,500 tonnes of rubber every year. We plan to progressively plant 500 ha of rubber trees and 300 ha of coconut trees each year. This will be funded through the sale of old rubber and teak trees as well as cash flows from existing operations,” he tells StarBizWeek.

At present, planted rubber trees and teak trees belonging to the PNG company cover an area of 3,513 ha and 58 ha respectively.

Of the 3,513 ha of rubber trees, the group will be gradually replanting 2,200 ha of old trees. As for coconut trees, the plantable area is 3,613 hectares in the PNG landbank.

Apart from rubber and coconut plantations, Tham says the group would do a feasibility study to plant hardy trees such as acacia.

“However, we are going to be occupied with rubber and coconut trees for many years to come,” he says.

The acquisition of the GHRM, PNG asset, by Greenyield is slated to be finalised by the third quarter of this year.

Tham adds that GRHM has zero borrowings.

“We needed more time to streamline the operations and make it efficient in PNG, so now we are ready to inject the assets into the group,” explains Tham.

Tham adds that the timing to inject the plantation assets into Greenyield is “right” as GRHM has just turned profitable.

He also says Greenyield would have the opportunity to own “scarce” title land as only 2.5% of land in PNG have titles, adding that 97% of the land there is customary land without state leases.

Tham notes that Greenyield would be able to extend its proprietary yield enhancement technology in the PNG plantations to boost yield.“This would allow Greenyield to have a higher stable source of recurring income,” adds Tham. He says though that it will only be in the medium to long term to long term for these assets to contribute significantly to the bottom line of Greenyield, as planting of rubber and coconut takes time to mature.

For 1Q22, Greenyield’s revenue rose 42.1% to RM14.9mil from RM10.5mil a year ago due to higher sales from plantation inputs and its household goods segment.

However, its net profit was down 2.7% to RM1.95mil in the quarter compared to RM2mil a year ago mainly dragged due to higher operating costs.

For the financial year ended Dec 31, 2021 (FY21), Greenyield posted a net profit of RM5.4mil, on the back of RM45.8mil revenue.

Moving forward, Greenyield’s group managing director Don Tham is cautiously optimistic as rubber prices are anticipated to be on the uptrend in the next two years.

For the group’s first foray into the coconut plantations, Tham says the prices for coconut oil in PNG have increased over the past 12 months and the popularity of coconut oil shows no sign of slowing down.

“It is expected that coconut oil price will continue to experience a dramatic price increase and the coconut oil industry will usher in a stable growth period.

“On a global scale, currently, the coconut oil industry is in a state of limited production while booming consumption provides an increased avenue for higher price growth,” he adds.

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Greenyields , rubber , plantations , Kelantan , PNG , palm oil

   

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