Boustead launches Malaysia’s first palm oil REIT

16 January 2007 11:11  [Source: ICIS news]

SINGAPORE (ICIS news)--Boustead Group launched its initial public offering of Malaysia’s first Islamic palm oil plantation real estate investment trust (REIT) on Monday.

 

The Al-Hadharah Boustead REIT, worth a total of ringgit (M$) 229.68m ($65.6m), will consist of 20m shares offered to the public and 2m shares open for application by eligible directors and employees at M$0.99, the Malaysia-listed company said in its prospectus.

 

The remaining 198m shares will be sold at M$1.05 each to institutional investors.

 

The REIT will invest in eight palm oil estates and two palm oil mills located in the states of Johor, Kelantan, Perak and Kedah, in Peninsula Malaysia.

 

Income sources for the REIT will include fixed rental paid by tenants, profit sharing based on a formula pegged to crude palm oil (CPO) and fresh palm fruit prices, and capital gains, the company said.

 

The REIT’s listing on the mainboard of Bursa Securities will take place on 8 February.

 

The launch of the REIT comes at a time when parts of Johor state are experiencing a second wave of floods due to heavy rainfall since December.

 

Worries of low CPO supply have pushed its price up to around M$1,950/tonne on Monday, according to the Malaysian Palm Oil Board.

 

A palm oil trader said that recent supply fears were mostly unwarranted as most plantations had already harvested palm fruit before the Hari Raya Haji holiday in Malaysia on 31 December.

 

This sentiment echoed those of other industry officials last month.

 

However, the trader added that since the next harvesting period would arrive by the end of this week, his optimism would last only if the floods start to subside over the weekend.

 

He said that the main problem was the transportation of palm fruit and kernel from plantations to mills.

 

Palm oil prices hovered around $560/tonne on Monday and dipped slightly to $555/tonne on Tuesday, he said.

 

He cited some producers as saying that palm oil prices would hit $600/tonne in February, adding that he was sceptical about it.

 

Even if supply were to hit a new low next month, he expects this to be offset by subdued demand due to the Chinese New Year holidays.

 

($1 = M$3.50)

By: Keith Tan Liming
+65 6780 4359

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