Plantation assets acquisition announcement
- First Resources (FR) announced acquisition of 17,600ha CPO plantation assets valued US$123m
- The acquisition will boost FR’s total planted area by 8% y-o-y
- Acquisition price seems fair at an EV/ha of US$6,972, on par with average of US$7,500/ha based on companies we track
- Maintain BUY with TP of S$2.00. Our earnings estimates unchanged for now, pending further details
What’s new
- First Resources Limited (FR) announce that its indirect subsidiary, PT Karya Tama Bakti Mulia, has successfully bid for the acquisition of plantation assets held by PT Tri Bakti Sarimas for a cash consideration of IDR 1.9 trillion (approximately US$122.7 million).
- The Acquisition involves mills, plantations and unplanted land bank covering a total site area of approximately 17,600 hectares located in the Riau Province, Indonesia, and was concluded on 28 December 2023 via a public auction conducted through the State Assets and Auction Service Office (“KPKNL”) under the Directorate General of State Assets (“DJKN”) for the execution of mortgage rights held by PT Bank Rakyat Indonesia (Persero) Tbk.
- The Consideration amount was arrived at based on the auction reserve price, which was set by Bank BRI after taking into consideration the most recent valuation performed by its appointed independent appraiser.
Our view
- We think the acquisition price is fair. The acquisition price implies an EV/ha of US$6,972/ha which is largely at par with average EV/ha of US$7,500/ha among companies under our coverage. Meanwhile, FR is trading at US$12,000/ha due to its superior profitability and ROE.
- We also believe the acquisition marks a step in FR’s inorganic expansion strategy. The acquisition is expected to increase the total planted area by 8.4% year-on-year in 2024. Despite the limited information on FR’s plans regarding whether to utilize the existing crops or undergo a major overhaul via replanting, we believe the integration of these assets will yield operational synergies and sustain FR’s positive output growth outlook. We are maintaining our earnings forecast, BUY rating for FR, with a TP of S$2.00 for now.