PPB Group Bhd (4065) may use the money from the sale of its sugar business to either raise its stake in Wilmar International Ltd or give it back to shareholders, say analysts.
“The PPB management has said before that it would like to increase its stake in Wilmar International,” a plantation analyst told Business Times yesterday.
PPB now has 18.22 per cent of the palm oil trader which is listed on the Singapore Exchange.
Last Friday, PPB told Bursa Malaysia that it planned to sell its entire stake in two sugar units and land used for sugar cane cultivation to Federal Land Development Authority (Felda) for RM1.29 billion.
It added that proceeds form the sale could be used for strategic investments locally or abroad.
However, OSK Research Sdn Bhd said PPB would only be able to buy another 1.3 per cent in Wilmar International based on the current price.
“We doubt the proceeds will be used to buy into Wilmar International since the additional stake will only raise its PBT (profit before tax) by RM59.5 million compared with about the RM165 million forgone from its sugar refining and trading business,” it said in a research note yesterday.
Instead, PPB may invest in Wilmar China as it may give it a bigger bang for the buck because the unit is to be listed on the Hong Kong stock exchange, said OSK.
Based on its a statement to Bursa Malaysia, the group said it may see a net gain of RM757.59 million from the sale of its three assets.
The company may opt for a special dividend considering it did so when it sold its plantation business a few years ago, said another analyst.
“If they decide to do so, we will only see the distribution to shareholders in about six months once the disposals are completed,” the analyst added.
PPB plans to sell all of Malayan Sugar Manufacturing Co Bhd (MSM) for RM1.22 billion to Felda Global Ventures Holdings Sdn Bhd, a wholly-owned unit of Felda.
It is also selling its 50 per cent stake in Kilang Gula Felda Perlis Sdn Bhd and 5,797ha of land used for sugar cane cultivation in Chuping, Perlis, to Felda Global Ventures. PPB shares gained 1.32 per cent to end at RM15.34 yesterday.