IOI Corp may acquire Unico-Desa stake

30 Oct 2007

KUALA LUMPUR: IOI Corporation Bhd will consider acquiring a stake in Unico-Desa Plantations Bhd, which is embroiled in a dispute over Unico Holdings Bhd¡¦s 29.3% equity interest in the plantation company, as part of its plan to grow its plantation business.

IOI Corp¡¦s group executive chairman Tan Sri Lee Shin Cheng said it would make such consideration should the opportunity arise and any such acquisition would have to be a controlling stake.

Unico board members and its ousted director Tan Kai Hee had engaged in a media war with the latter opposing the company¡¦s plan to undertake a capital reduction exercise, followed by the distribution of Unico-Desa shares to Unico¡¦s 22,000-odd shareholders.

According to a report by Reuters yesterday, IOI Corp is seeking its board¡¦s approval to buy a substantial stake in Unico-Desa.

While not ruling out a move to buy into Unico-Desa, Lee said yesterday that IOI Corp was looking at an acquisition of a plantation company which is bigger than Unico-Desa.

¡§Unico-Desa is a comparably small plantation company. We are looking into something even bigger than this,¡¨ he said, adding that IOI Corp is in talks with several parties on its plan to expand its plantation business and expects to complete at least one acquisition of a private plantation company by end FY08. The acquisition is likely to be a local plantation firm.

Speaking to reporters after his company¡¦s AGM and EGM yesterday, Lee said the acquisitions were part of its two-pronged growth strategy, and IOI Corp would continue to plant from undeveloped land.

To date, he said the group had a total of 155,000ha of planted land bank excluding another 70,000ha that would come in upon the completion of a sales and purchase agreement in Indonesia, which expected in a few days.

He said it expected some immediate contributions from its matured plantations in Indonesia, and this would gradually increase over the next three years.

High crude palm oil (CPO) prices had boosted the group¡¦s net profit in its financial year ended June 30, 2007, and Lee expected sustained growth and profitability in FY08.

Lee said the group had committed to selling CPO at an average price of RM2,500 per tonne in its first half of the financial year ending Dec 31, 2008, from an average selling price of RM1,700 per MT in FY07.

¡§This year was a record, next year will be another record driven by high crude palm oil (CPO) prices, the uptrend in the property market and also our manufacturing ¡X refineries, oleochemicals, specialty fats and oil ¡X are doing extremely well,¡¨ Lee said.

On its property business, he said IOI Corp had at least 10 residential and commercial projects under construction in FY08 with a gross development value (GDV) of RM1 billion including a residential project in Jalan Ampang, Kuala Lumpur.

The group would also begin construction on a residential project on Sentosa Island in Singapore by the beginning of 2008 with a GDV of S$1 billion (RM2.3 billion) he said.

Lee said IOI Corp¡¦s total land bank had a GDV of at least RM5 billion, with between 2,428ha and 2,832ha of undeveloped land bank, excluding those in Singapore. He said the group would continue to explore opportunities in the property sector overseas from time to time.

On the group¡¦s downstream resource-based manufacturing business, he said the group was looking to expand the 800,000 tonne capacity of its refinery in Rotterdam, Netherlands. Currently IOI Corp¡¦s four refineries have a refining capacity of three million tonnes, he said.

The group had also postponed its venture into the bio diesel industry until further study, preferring to focus on its palm oil business which enjoyed robust demand, he added.

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