PETALING JAYA: Boustead Plantations Bhd’s proposal to lease out a portion of its Telok Sengat Estate in Johor to cultivate large-scale algae plantation is expected to generate up to RM18.7mil in rental income per year.
According to Maybank IB Research, the proposed venture if it materialises can help the group add over RM11mil per year in its profits for the financial year 2022.
It deemed the rental returns as “significant” and the conditional land lease agreement would see it leasing out for a 30-year period with an option for another 30 years.
The research house, which is upbeat on the proposal, noted that Boustead Plantations would receive lease rentals of RM1,210 per acre per month or RM35,880 per ha per year.
Based on its recent briefing with the group’s new CEO Zainal Abidin Shariff, Maybank IB Research said: “While details remain sketchy, we sense a greater willingness for the group to monetise and sweat its existing assets to quicken its transformation while rewarding its shareholders at the same time.”
The research house said Boustead Plantations remained a “buy” with an unchanged discounted revised net asset value based on target price of 81 sen.
“The group is not adverse to sell non-strategic or older estates.
“When its balance sheet strengthens, the group will look at purchasing younger estates to rebalance its ageing trees profile,” added Maybank IB Research.
It noted that the group has also undertaken “very little forward sales until now”.
The weak fresh fruit bunches output in the first half of 2021, which fell 14% year-on-year, was mainly due to the lagged effect of little fertilising work in 2019 and heavy rainfall in the first quarter of this year, it said.
Meanwhile, Maybank IB Research said the sustainability of the group’s quarterly dividend payouts would depend largely on its profitability.
“This is opposed to our earlier belief that the RM37mil one-off goods and services tax (GST) refund that was received on Aug 5 will be recognised as one-off income in the third quarter of 2021,” it said.
Boustead Plantations has also clarified that this will not be the case as the accounting treatment of the refund is merely a movement in its balance sheets from “other receivables” to “cash”.
“Following the briefing, we will remove the RM37mil one-off GST refund from our forecast FY21 headline net profit.
“However, our forecast FY21 core net profits is unchanged at RM101mil,” Maybank IB Research said.
It had also kept its FY21’s forecast net dividend per share unchanged at 3.6 sen, which is based on an 80% dividend payout ratio of the core net profit.