Boustead Plantations Bhd has proposed an RM429 million sale of Kulai Young Estate in Johor to YTL Power International Bhd’s 70%-owned subsidiary SIPP Power Sdn Bhd.
The group anticipates generating around RM323 million from the disposition of the 664ha of plantation land.
This equates to a gain of RM486,400 per hectare, increasing the value of each share by 14 sen, Boustead Plantations said in a statement on Tuesday.
The purchase price is 10%, or RM39 million, more than the land’s market worth of RM390 million as determined by independent valuer C H Williams Talhar & Wong Sdn Bhd.
Boustead Plantations CEO Zainal Abidin Shariff stated that the transaction is an exceptional opportunity for the company to monetise this asset in accordance with the group’s Reinventing Boustead strategy.
“It is undoubtedly good for the group, as we are able to unlock the asset value, with the funds being used to reduce borrowings and satisfy working capital requirements,” he explained.
“The proceeds from the proposed disposition will enable us to improve our balance sheet in preparation for future expansion and manage our gearing by cutting borrowings, lowering the group’s gearing ratio from 0.48 to 0.31,” he added.
Following the repayment of borrowings, the group expects to save around RM15 million per year in interest costs.
Additionally, Boustead Plantations will strengthen its partnership with SIPP Power by negotiating a five-year plantation management agency arrangement that will benefit the former’s earnings.
Datuk Yeoh Seok Hong, managing director of YTL Power, stated that the acquisition of Kulai Young Estate is particularly crucial for the firm due to its accessibility and closeness to high-growth industrial areas.
“We have been looking for chances for YTL Power to engage in renewable energy sources, and solar is a clear priority given the country’s significant solar capacity,” he said.
The group’s shares closed unchanged at 58 sen, valuing it at RM1.31 billion.
Published by Zack Baharum