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Plantations: Kulim
by Meena Lakshana
Decent four-decade run for JCorp unit
Johor Corporation’s diversified oil palm planter Kulim (M) Bhd delivered decent returns to its majority and minority shareholders before delisting on Aug 4, following a RM2.26 billion selective capital repayment exercise.
The RM4.10 apiece offered to buy out minority shareholders — who collectively held a 59% stake — was 24.24% above the then prevailing market price and 1.06 times its audited net asset per share of RM3.88 as at end-2015. The trading of Kulim’s shares was suspended on June 17 at RM4.06.
The decision to go private followed Kulim’s disposal of one of its key assets — its 48.97% stake in New Britain Palm Oil Ltd (NBPOL) to Sime Darby Bhd for £525.4 million (about RM2.8 billion) on Feb 26 last year. NBPOL contributed RM2.1 billion or 65.73% to Kulim’s revenue for FY2014 and represented RM2.73 billion or 48.72% of the group’s net assets in the same period.
Following the disposal, Kulim’s major revenue contributing assets are its Malaysian oil palm plantations and its 50.6% stake in E.A. Technique (M) Bhd, a shipowner and operator of offshore marine vessels.
Kulim has announced its intention to expand into oil exploration in Indonesia, particularly the niche upstream exploration, development and production activities. It may require additional capital expenditure, and the operations there are unlikely to be immediately earnings accretive. Thus, the company said the selective capital repayment was a chance for minority shareholders to realise cash from their investment.
Independent adviser AmInvestment Bank deemed the RM4.10 offer price to be “reasonable”, considering the premium to the market price and JCorp’s holding, although not entirely fair as it falls short of its sum-of-parts valuation of RM6.25 million or RM4.78 per share.
In any case, Kulim provided decent returns to shareholders despite lower crude palm oil (CPO) prices the past four years — helped by the RM1.32 billion gain from the disposal of NBPOL.
Its return on equity rose to an all-time high of 32.6% in FY2015 from only 5.5% in FY2012.
Kulim’s pre-tax profit grew at a three-year compound annual growth rate of 22% to RM162.51 million in FY2015. The jump in profit before tax was also due to a higher contribution from its oil and gas support services segment, thanks to E.A. Technique, which clinched two new contracts at the end of FY2015 and delivered floating storage and offloading (FSO) vessel Nautica Tembikai to an oilfield in July last year. Kulim holds a 50.6% stake in E.A. Technique — which was listed on Bursa Malaysia on Dec 11, 2014 — via Sindora Bhd.
Moving forward, the outlook for Kulim’s plantations segment is less than rosy on sluggish CPO prices. E.A. Technique’s outlook, though, looks brighter as 91% of its fleet of 35 vessels are on long-term charters. Only four vessels have contracts expiring in 2017 and 2018; the rest have tenures stretching to December 2025.