Pricey offer for NBPOL justified

KUALA LUMPUR: SIME Darby Bhd may be paying a lot for New Britain Palm Oil Ltd (NBPOL), but this is justified by the latter’s valuable assets, analysts said.

Affin Hwang Capital calculated that Sime Darby's general offer price of RM5.6 billion for all NBPOL shares works out to be an enterprise value per planted hectare of RM84,200 for the Papua New Guinea-based planter.

Although this looks high when compared with Felda Global Ventures Holding Bhd’s proposed acquisition of Asia Plantations’ estates in Sarawak, Affin Hwang said NBPOL has a better oil palm age profile, higher fruit yield and plantable reserves of 22,000ha.

The research house is positive on Sime Darby for seeking board and management control in NBPOL, and had upgraded its rating on the conglomerate. It thinks Sime Darby’s shares can rise to RM9.31.


MIDF Research, too, is positive on Sime Darby buying NBPOL despite the £7.15 (or RM23) offer price representing a 85 per cent premium over NBPOL’s last closing price on Wednesday.

“NBPOL is one of the best performing palm oil companies in the world with consistent fresh fruit bunch yield of more than 23 tonnes per hectare,” it said yesterday.

While it valued Sime Darby’s shares at RM9.70, MIDF Research has kept a “neutral” stance on its overall performance due to the risks of other businesses not performing well. 

Sime Darby's net gearing is seen to be manageable. “We believe Sime Darby is able to increase its borrowings without jeopardising its credit risk,” said MIDF Research.

Hong Leong Investment Bank (HLIB), meanwhile, has recommended a “hold” call and maintained Sime Darby’s target share price at RM9.75. It noted that the high price tag of £7.15 per NBPOL share is justified, given the scarcity of sizeable brownfield plantation landbank. “NBPOL estates are seen to be a good platform for Sime Darby to expand into PNG’s palm oil industry,” it added.

HLIB said the acquisition would only raise Sime Darby’s net gearing from 0.22 times to 0.44 times. “Earnings-wise, we estimate that the acquisition will add 2.5 per cent to Sime Darby’s forecast earnings in the next financial year.”

AmResearch Sdn Bhd has maintained a “buy” call on Sime Darby while valuing the conglomerate’s shares at RM10.58. It viewed Sime Darby’s offer as “pricey” at 22 times of next year’s forecast earnings but admitted that this price tag had to be attractive enough to obtain a controlling stake of at least 51 per cent in NBPOL.