KUALA LUMPUR: Boustead Plantations Bhd (BPB) expects to realise an estimated gain of RM527.3mil from the sale of its 677.78ha freehold land in North Seberang Prai to SP Setia Bhd’s unit Setia Recreation Sdn Bhd for RM620.1mil cash.

In a filing with Bursa Malaysia, the company said this represented an upfront gain of RM777,907 per hectare, which would increase BPB’s shareholders value by about 33 sen per share.

BPB said given the size and market value of the land, it might not be easy to sell it to a single buyer.

“The strategic location of the lands (the land comprises five adjoining parcels of land) and its potential to be developed into a new township provides an opportunity for BPB to sell the lands to Setia Recreation at a substantial premium over the net book value of the lands,” it said.

The sale consideration represents a premium of RM7.1mil or 1.16% over the market value of the lands of RM613mil or RM8.40 per sq ft accorded by an independent valuer.

BPB vice chairman Tan Sri Lodin Wok Kamaruddin explained in a press statement: “It is not often that we receive attractive offers that resonate so well with our business strategy.... Weighing the prospects of maintaining the asset, even with crude palm oil trending at favourable levels, the sale of the land offers greater value to the group.”

SP Setia, meanwhile, said it was notified of its successful tender bid for the land, which forms part of Malakoff Estate, on Nov 9. In its maiden entry into the mainland of Penang, the real estate player plans to develop an eco-themed township on this land over 15 to 20 years with an estimated gross development value of RM9.6bil.

Setia Recreation signed on Thursday a sale and purchase agreement with CIMB Islamic Trustee Bhd, which acts in the capacity as trustee for BPB, in relation to the land purchase.

BPB said it would use the proceeds from the proposed sale to manage its gearing and cash position.

Part of the proceeds amounting to RM287mil will be used to repay bank borrowings, thus reducing the group’s gearing ratio from 0.42 times to 0.23 times. 

“In the interim period, should the proceeds of RM300mil earmarked for the acquisition of oil palm plantation lands or oil palm plantation companies be used for repayment of bank borrowings, BPB Group’s gearing ratio will further reduce to 0.12 times,” it noted.

With the addition of the RM300mil, BPB said, the group’s cash deposits would rise to about RM687mil. This gives it the opportunity to use the funds to undertake strategic investments and expansion in new plantation land banks at lower costs when available.