According to Kenanga Research, TSH Resources Bhd is expected to make a net disposal gain of RM398 million from the proposed sale of its North Kalimantan landbank for RM679 million.
The sale would be beneficial to the company, according to the firm, because the land was not profitable or cash-flow positive.
The land is in the Bulungan Regency’s Tanah Kuning and Mangkupadi, on Kalimantan’s northeastern coast.
“If the Heads of Agreement (HoA) result in a simple outright cash sale, the proposal is welcomed on several fronts: higher earnings per share (EPS) thanks to lower interest costs in the future due to debt repayment, less volatile EPS once debts are trimmed, and an acceleration in new or re-planting, all of which should translate to faster growth.
“We believe TSH will be able to pay off some of its debts once the project is completed. The reduction in after-tax interest expenses is estimated to be RM25 million per year if the entire consideration of RM679 million is used to repay borrowings,” Kenanga Research says.
TSH’s 90%-owned Indonesian subsidiary, PT Bulungan Citra Agro Persada, recently signed a memorandum of understanding (MoU) to negotiate land sales to PT Kawasan Industri Kalimantan Indonesia (KIKI) and PT Kalimantan Industrial Park Indonesia (KIPI).
TSH said it would sell 13,215 hectares of land certified under Hak Guna Usaha (HGU) for RM679 million in cash, while it would sell nearby land it had acquired but was still awaiting certification and registration for RM51,380 per hectare.