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F&N's RM215.5mil estate acquisition is value-accretive, says MIDF Research

KUALA LUMPUR: Fraser & Neave Holdings Bhd's (F&N) proposed acquisition of Ladang Permai Damai will be value-accretive for the company due to suitability of the Permai Damai Estates for its integrated dairy farming project. 

F&N's subsidiary Dagang Sejahtera Sdn Bhd has entered into a conditional share sale agreement with Dupont & Leosk Enterprises Sdn Bhd and Malaysia Nominees (Tempatan) Sdn Bhd to acquire the entire stake in Ladang Permai Damai for RM215.5 million.

MIDF Research said with the proposed acquisition, F&N would be able to enter the upstream fresh milk business for downstream production and distribution of fresh milk. 

The firm said after the completion of the acquisition, Ladang Permai Damai would lease the estates from F&N at a market rate to carry out operations of the integrated dairy farm and crop plantation.

"This will enable F&N to own a vertical integration business and operations based on locally grown crops for feed to F&N's dairy farm, which in turn will lower the value chain cost per litre. 

"We think this will be beneficial for the company as it will be less dependent on imported milk for its production," it said. 

MIDF Research house said positive prospects estimated from F&N proposed acquisition due to the positive market value of RM224.2 million for the underlying assets of Ladang Permai Damai and no outstanding debt or liabilities of Ladang Permai Damai. 

"We estimate that the proposed acquisition will not have a substantial material impact on the gearing ratio of the company

"We maintain Buy on the stocks with an unchanged target price of RM30.03," it said.

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