SINGAPORE: Puncak Niaga Holdings Bhd aims to be among the country’s top five palm oil producers in the next five years.
It is also aiming for the business to contribute to half of the company’s revenue and net profit.
The environmental engineering firm, established in 1997, is expanding into the oil palm plantation business via a joint venture (JV) by acquiring Danum Sinar Sdn Bhd for RM446.51 million in cash.
Danum Sinar, a unit of Shin Yang Holdings Sdn Bhd, owns 46,674ha of plantation land (9,766.9ha of which are planted), mostly in Murum, Sarawak.
Puncak Niaga executive chairman Tan Sri Rozali Ismail said the transaction is on target to be completed by January.
“We decided to get involved in the plantation business because it is a long-term business. For the last 20 to 30 years, oil palm price has been sustainable. It’s a good business and not really impacted by the slowdown.
“That is why we are putting our investment in the plantation business. We are in the process of getting all the approvals. By acquiring 46,674ha of oil palm plantation land, and hopefully more in the future, we will be one of the largest plantation companies in Malaysia,” he told Business Times after accepting an award for Outstanding Leaders in Asia at the Asia Corporate Excellence and Sustainability Awards (ACES) for the firm, here, last week.
Puncak Niaga owns 60 per cent of the JV and its share of the purchase price is RM267.9 million, to be funded by internal funds.
The other parties in the JV are Sunshine Upland Sdn Bhd (30 per cent), which is owned by Tan Sri Yee Ming Sing, and Astaka Suria Sdn Bhd (10 per cent) funded by Tan Sri Ling Chiong Ho.
Ling is the executive chairman of the listed Sarawak Oil Palms and also founder/chairman of Shin Yang Group, while Yee is a well-established planter in Sarawak.
Puncak Niaga has been looking for assets to acquire after selling its subsidiaries, Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor, to Pengurusan Air Selangor Sdn Bhd a year ago for RM1.56 billion.
In April, Puncak Niaga said it would acquire TRIplc Bhd, a construction and property firm, in which Rozali owns a substantial stake.
The deal, which is expected to be completed in the first quarter of next year, will allow Puncak Niaga to diversify into property development and make the sector one of its top three income earners in the future after environmental engineering and plantation, said Rozali.
For the six months ended June 30 2016, Puncak Niaga recorded a net loss of RM63.8 million on the back of a lower revenue of RM23.8 million.
Currently, Puncak Niaga’s revenue is derived from its environmental engineering business that encompasses water and wastewater, sewerage and construction.
Rozali anticipates that in the next five years, environmental engineering and plantation will contribute equally to the group’s revenue and net profit. Earnings from property development will come in after 2020, he said.
Rozali is optimistic that Puncak Niaga’s earnings will improve from next year, the majority to still be contributed by environmental engineering, with some coming in from plantation.
Puncak Niaga closed one sen lower on Friday at 99 sen.
An investment analyst has advised investors to hold their position in the firm. This has been the consensus forecast since March 10 last year. The previous consensus forecast advised that Puncak Niaga would outperform the market.
On the ACES award, Rozali said it would drive Puncak Niaga to look for more opportunities in Asia.