DutaLand has one year to identify new business

/ / Real Estate

PETALING JAYA: DutaLand Bhd will have a year to identify a new business to anchor its listing status, if the proposed disposal of its plantations business receives the green light from shareholders.

With an additional RM750mil in hand, the company will become a cash-rich entity upon the disposal of its plantations in Sabah, which have been a cash cow for the group over the years.

The plantation business has been the single largest contributor to DutaLand’s revenue since financial year 2012 (FY12) as the company’s property development business played second fiddle.

In FY17, DutaLand’s plantations played a lesser role for the company, as the property segment became the largest topline contributor of nearly 60%.

The stronger revenue contribution from the property segment was following the disposal of a strategic stake in a joint development of a piece of land in Kenny Heights.

DutaLand has hinted that it is eyeing to venture into new businesses, backed by the proceeds from the expected disposal of its plantations.

The group’s proposal to dispose of its plantation assets does not seem to bode well with investors, as the Main Market-listed counter has declined by nearly 16% to 61.5 sen over the last one week.

This was in sharp contrast to DutaLand’s share price which has risen significantly by nearly 83% since January up until Oct 30, when the announcement pertaining to the disposal was made.

When approached during DutaLand’s AGM last weekend, group managing director Tan Sri Yap Yong Seong remained tight-lipped on the potential new businesses on the cards.

“Just wait until the next extraordinary general meeting (EGM) to get more details,” he said, referring to the EGM that will be convened to seek approval from shareholders for the land disposal.

To note, Yap is the single largest shareholder of the group, with an equity interest of 50.45%.

A shareholder who spoke to StarBiz said that the EGM is likely to be held in February next year.

Last week, DutaLand proposed to dispose of its 11,579.31 ha plantations in Sabah to Boustead Plantations Bhd for RM750mil. The transaction has to be approved by the shareholders.

A strong hint of the company likely to embark on a new business within a year came from the announcement in conjunction with the disposal.

DutaLand stated that Bursa Securities may classify it as no longer suitable for continued listing, as the proposed disposal is a major transaction.

As such, DutaLand had said that it would be required to regularise its condition within 12 months. The company has indicated its intention to maintain its listing status, moving forward.

According to its annual report for FY17, the group owns about 11,977.91 ha of plantation land in Sabah.

DutaLand intends to utilise nearly 94% of the total proceeds, or RM707mil, to pursue new business undertakings within three years from the receipt of the proceeds.

The group aims to diversify its business portfolio to generate recurring income.

“The proposed disposal will enable the group to unlock the value of its assets. Given the size, location and market value of the land, it is not easy for DutaLand to dispose of the plantation assets at the market value to a single buyer.

“As such, the proposed disposal appears to be an attractive offer that is in line with the group’s objective to enhance shareholder value,” said DutaLand in its filing with the stock exchange.

This is not the first time for DutaLand’s plantation assets to be sought by other parties.

Back in 2011, plantation giant IOI Corp Bhd had proposed to acquire DutaLand’s entire plantation land bank of 11,977.91 ha at RM830mil or RM69,299 per ha. However, the deal did not materialise, reportedly due to non-compliance reasons.

Analysts opine that DutaLand may pocket a handsome gain from the sale of its otherwise less-performing plantation assets.

This is despite the RM750mil price tag for the land being at a discount of RM10mil or 1.3% from the market value of RM760mil.

In a recent note covering Boustead Plantations, Maybank IB Research has indicated that the land purchase has been set at a lofty valuation.

“Based on the newly available data, the acquisition price translates to an enterprise value of RM75,012 per ha, about 16% higher than our earlier estimates.

“The estate is not well managed, with fresh fruit bunch yields of only 7.8 tonnes per ha. For such an old estate with no mill, we deem the price to be expensive,” it said.

It is still too early to decide whether DutaLand’s latest bet in disposing of its plantations land and entering a new segment is worthwhile. Its shareholders will have the final say in completing the proposed sale.

However, judging from the latest share price movement, it seems that the investors may not be bullish on the deal.

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