Plantation giant IOI Corp Bhd is in talks to buy Achi Jaya Plantations Sdn Bhd’s 12,074ha-oil palm plantation in Labis, Johor, and possibly other assets as well, sources familiar with the matter tell KiniBiz .

It is understood that the price being negotiated is between RM800 million to RM900 million.

“Talks are ongoing, it’s not sure when it will be concluded, though the company (Achi Jaya Plantations) has been up for sale for a while,” a source said.

It is not clear what exactly are the assets that IOI is looking at.

IOI’s executive director Lee Yeow Chor has declined to answer questions from KiniBiz pertaining to the Achi Jaya Plantations acquisition.

Achi Jaya Plantations (formerly Achi Jaya Services) acquired Socfin Plantations Sdn Bhd’s assets comprising the 12,074ha-oil palm estate, workers’ quarters, staff and executive bungalows, a clubhouse, a nine-hole golf course, a 60-tonne oil mill and other facilities and amenities for RM512.16 million in January 2004.

The price jump from RM512.16 million to current prices of RM800 million to RM900 million or close to 80 percent, does raise some eyebrows.

However, according to an analyst who covers the plantation sector, the average price of a plantation land is in the region of RM70,000 per ha, which would make the price tag of RM800 million to RM900 million reasonable.

As at the end of December 2011, Achi Jaya Plantations came out with a post-tax profit of RM51.51 million, from revenues of RM229.74 million. The company paid out dividends of RM20 million.

Rounding up the profits to RM50 million, the acquisition price is between 16 times to 18 times of FY2011's earnings.

Although it is at 16 to 18 times the price, an analyst says that this amount is reasonable.

'Price tag not a problem'

As at the end of December 2011, the plantation company had non-current assets of RM1.64 billion and current assets amounting to RM30.02 million.

On the other side of the balance sheet, Achi Jaya Plantations had long-term debt commitments of RM215.14 million, while its short-term borrowing was RM81.41 million.

It is also noteworthy that Achi Jaya Plantations had almost RM1.2 billion in reserves.

The price tag on Achi Jaya Plantations should not pose a problem for IOI.

In addition, as at the end of December last year, IOI had cash and bank balances amounting to RM1.29 billion, while on the other side of its balance sheet, the company had long-term debt commitments of RM6.93 billion, whereas its short-term borrowing was at RM787.7 million.

For six months at the end of December last year, IOI Group posted a net profit of RM1.13 billion from RM6.96 billion in revenue.

Interestingly enough, Achi Jaya Plantations is a company linked to Sarawak chief minister Abdul Taib Mahmud’s brother, Onn Mahmud.

Go to KiniBiz for more .