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Tuesday, February 28, 2017

TDM - Acquiring Additional Stake in Plantation Co

Author: PublicInvest   |   Publish date: Tue, 28 Feb 2017, 09:30 AM 


TDM has planned to increase its stake in Ladang Rakyat Terengganu S/B from 19.1% to 42.6% via a proposed acquisition of Terengganu Incorporated S/B’s 42.6% stake. Meanwhile, the 4Q results are expected to be released today and we expect to see favourable results due to stronger CPO prices. Pending further information about the proposal, we maintain our Outperform call with an unchanged TP of RM0.85.
  • Salient details about the proposed acquisition. TDM has executed a heads of agreement with Terengganu Incorporated S/B, who is also the major shareholder of TDM, holding about 61.1% stake. The proposed acquisition will increase TDM’s stake in Ladang Rakyat Terengganu S/B, who owns 11,467ha oil palm planted area in Terengganu, from 19.1% to 61.7%. In FY15, Ladang Rakyat Terengganu S/B reported revenue, PATAMI and net assets attributable to owners of RM194m, RM4.1m and RM163m, respectively.
  • Synergies. The acquisition of additional stake in Ladang Rakyat Terengganu S/B should help TDM to consolidate its balance sheet, which would see an additional planted area of 11,467ha to 55,960ha. It would also increase TDM’s planted area in Terrengganu from 31,848ha to 43,315ha. Meanwhile, the younger age profile of Ladang Rakyat Terengganu S/B’s planted area would also help lower TDM’s age profile from 15.36 years old to 13.90 years old.
  • Subject to approvals. The proposed acquisition is subject to the approval from TDM shareholders, Terengganu Incorporated S/B, Ladang Rakyat and relevant authorities. The execution of the definitive share sale agreement is expected to be signed within 6 months from the date of Heads of Agreement. As Terengganu Incorporated S/B has invested interest in both entities, it will abstain from voting.
Source: PublicInvest Research - 28 Feb 2017

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