PETALING JAYA: Amid the bullish crude palm oil (CPO) price, some plantation companies are unlocking the value of their assets.

       This week, NPC Resources Bhd said it had accepted a non-binding offer from IOI Corp Bhd to buy its oil palm agriculture land in Sabah for RM281.22mil.

       About three weeks ago, IJM Corp Bhd hived off its entire stake in IJM Plantations Bhd to Kuala Lumpur Kepong Bhd (KLK), which will strengthen the former’s balance sheet to undertake future infrastructure projects.

       Similarly, analysts are generally positive on TSH Resources Bhd’s plans to dispose of two oil palm estates and one palm oil mill in Sabah for RM248mil cash to oil palm plantation firm Sharikat Keratong Sdn Bhd.

       The disposal would help TSH meet its immediate debt obligations and allow further room for expansion.

       However, RHB Research said it would impact the company’s bottomline negatively in financial year 2022 (FY22) and FY23.

       In terms of pricing, the research firm said it was “relatively reasonable” with TSH estimated to get about RM77, 736 per ha for the two parcels of land.

       This was in line with the average transaction price for brownfield land in Sabah of RM75, 000-RM90, 000 per ha.

       “While it is at the lower end of the range, we believe this is reasonable given the old age profile of 18 years, with an implied fresh fruit bunch (FFB) yield of 17.2 tonnes per ha.

       “Assuming the transaction is finalised by the first quarter of next year, earnings are expected to decline by 8%-10% for FY22-FY23, while its total planted area is reduced by 8%.

       “However, the proceeds will allow TSH to immediately pare down its debts, with RM728mil due within a year.

       “This will reduce TSH’s net gearing from 0.71 times as at end-2020 to 0.53 times, ” said RHB Research.

       On a more positive note, the improved gearing will allow the company to raise additional funding to accelerate the development of its remaining 30, 000ha of unplanted land bank in Indonesia, which will contribute positively to its future performance, it added.

       According to Kenanga Research, with an average age profile of 18.3 years, the disposal also relieves TSH from major replanting activities in the coming years as a significant portion of its estates are due for replanting.

       On the earnings decline, it said this would be offset by interest savings estimated around RM8mil to RM9mil.

       TSH is expected to recognise a one-off gain of RM104.3mil in the first quarter of FY22.

       RHB Research has a RM1.20 target price on the stock, while Kenanga Research has listed it at RM1.05 pegged at FY21’s price earnings ratio of 17 times.