KUALA LUMPUR: Wijaya Baru Global Bhd, in which politician Datuk Seri Tiong King Sing owns a 32.02% stake, will begin logging operation in Indonesia in 2Q12, after having received the go-ahead from shareholders at the EGM yesterday to acquire Wealth Gate Pte Ltd and Suffolk Pte Ltd for a total of US$80 million (RM251 million).
Suffolk and Wealth Gate, incorporated in Singapore, have 80,000ha of land in Irianjaya, Indonesia that have been approved for oil palm plantation and related activities. The land valued at US$1,000 per ha is covered with virgin forests and Wijaya will extract the timber first before the area is converted into oil palm plantations.
Wijaya chairman Datuk Abdul Azim Mohd Zabidi said there are no plans to undertake oil palm plantation in Indonesia at the moment,though it remains an option.
He added that after logging is completed and the land cleared, only then will the company weigh options to either venture into plantation or sell the land or lease it to others to plant oil palm trees.
“It is (venturing into oil palm plantation) on the radar and the option is there. But Wijaya has always been a timber company. We had a timber concession in Sarawak and that licence expired in July 2010. We want to stay focused on our core business and that is why we explored this deal,” said Azim.
“This business (timber) has been contributing well to profits year in, year out for the last 20 years,” added Azim.
The concession for oil palm cultivation for the total 80,000ha will last for 35 years and may be renewed for another 25.
Azim acknowledged that there has been a global slowdown due to issues in the eurozone and the US, but said, “What goes down must come up. When the global market recovers, we expect to see demand for construction activity increase, hence more demand for timber.”
“Furthermore, it is unlike those days where you had a lot of timber concession areas. In fact, Indonesia has imposed a (two-year) moratorium (from April 2010) as part of an international treaty with Norway. Fortunately, this (the two plots of land) was approved prior to that,” said Wijaya Group CEO and executive director Datuk Faizal Abdullah.
Wijaya will pay for 20% of the US$80 million purchase consideration via internal funds with the remaining 80% in borrowings sourced from Export-Import Bank of Malaysia Bhd (Exim). The company could not raise funds through a rights issue or shares placement as its current stock price is trading below its par value of RM1.00.
The acquisition should be completed by year-end after Wijaya secures the necessary funding, said Azim, and the company will start clearing the land.
Since both plots of land are virgin forests, Wijaya will have to build up the entire infrastructure for timber extraction which Azim said will cost around RM40 million, including the cost of setting up a sawmill.
Timber logging could begin as early as 2Q12 once the infrastructure is in place, said Azim, who said Wijaya has all the appropriate permits, including undertaking an environmental impact assessment.
Wijaya’s share price rose sharply yesterday to close at 80.5 sen, up 4.5 sen or 5.9% in reaction to the company getting shareholders’ approval for the Indonesian deal.
This article appeared in The Edge Financial Daily, December 7, 2011.
Suffolk and Wealth Gate, incorporated in Singapore, have 80,000ha of land in Irianjaya, Indonesia that have been approved for oil palm plantation and related activities. The land valued at US$1,000 per ha is covered with virgin forests and Wijaya will extract the timber first before the area is converted into oil palm plantations.
Wijaya chairman Datuk Abdul Azim Mohd Zabidi said there are no plans to undertake oil palm plantation in Indonesia at the moment,though it remains an option.
He added that after logging is completed and the land cleared, only then will the company weigh options to either venture into plantation or sell the land or lease it to others to plant oil palm trees.
“It is (venturing into oil palm plantation) on the radar and the option is there. But Wijaya has always been a timber company. We had a timber concession in Sarawak and that licence expired in July 2010. We want to stay focused on our core business and that is why we explored this deal,” said Azim.
“This business (timber) has been contributing well to profits year in, year out for the last 20 years,” added Azim.
The concession for oil palm cultivation for the total 80,000ha will last for 35 years and may be renewed for another 25.
Azim acknowledged that there has been a global slowdown due to issues in the eurozone and the US, but said, “What goes down must come up. When the global market recovers, we expect to see demand for construction activity increase, hence more demand for timber.”
“Furthermore, it is unlike those days where you had a lot of timber concession areas. In fact, Indonesia has imposed a (two-year) moratorium (from April 2010) as part of an international treaty with Norway. Fortunately, this (the two plots of land) was approved prior to that,” said Wijaya Group CEO and executive director Datuk Faizal Abdullah.
Wijaya will pay for 20% of the US$80 million purchase consideration via internal funds with the remaining 80% in borrowings sourced from Export-Import Bank of Malaysia Bhd (Exim). The company could not raise funds through a rights issue or shares placement as its current stock price is trading below its par value of RM1.00.
The acquisition should be completed by year-end after Wijaya secures the necessary funding, said Azim, and the company will start clearing the land.
Since both plots of land are virgin forests, Wijaya will have to build up the entire infrastructure for timber extraction which Azim said will cost around RM40 million, including the cost of setting up a sawmill.
Timber logging could begin as early as 2Q12 once the infrastructure is in place, said Azim, who said Wijaya has all the appropriate permits, including undertaking an environmental impact assessment.
Wijaya’s share price rose sharply yesterday to close at 80.5 sen, up 4.5 sen or 5.9% in reaction to the company getting shareholders’ approval for the Indonesian deal.
This article appeared in The Edge Financial Daily, December 7, 2011.
