Boustead to add more value to Islamic plantation REIT

By pooikoon@nstp.com.my

November 24 2006

THE Boustead Group, which will float a RM472 million Islamic plantation real estate investment trust (REIT) in January 2007, is expected to sell more plantation assets into the fund from time to time.

Group managing director of Boustead Holdings Bhd Tan Sri Lodin Wok Kamaruddin said the group boasts over 100,000ha of land, of which about 80 per cent is planted.

As only 12,641ha will be sold to the REIT at the start, the group will still be left with sufficient assets that could be injected into the trust in the future, he said.

"We believe we have the size to grow," he told reporters in Kuala Lumpur yesterday. The property trust will have the first right of refusal in buying plantation assets owned by the group and it may also purchase from other parties when opportunities arise.

"If crude palm oil prices (CPO) continue to improve, unitholders will also benefit," he added.

The REIT has an annual profit-sharing of net incremental income based on a formula pegged to CPO and fresh fruit bunch prices. This may translate into higher dividend yield for investors.

"I cannot say about the expansion target, but we will do our best to continue adding value to the REIT and make it interesting for unitholders," Lodin said.

The Al-Hadharah Boustead REIT will be managed by Boustead REIT Managers Sdn Bhd, a subsidiary of Lembaga Tabung Angkatan Tentera. Boustead Group will hold 53.4 per cent of the property trust post-listing.

The trust will own eight oil palm estates and two mills in Peninsular Malaysia upon listing. It is buying these assets for RM472 million at a 3.42 per cent discount from the market value.

The REIT will pay at least 98 per cent of its distributable earnings to unitholders for the first three years, with a dividend distribution of at least 7.38 sen per year.

Lodin said Boustead plans to use the proceeds from selling assets to the trust to repay borrowings and for working capital.

He said additional capital is needed to expand the petrol stations under BHPetrol, to grow its plantation business, as well as for a biodiesel plan.

He gave no details of the biodiesel project but said the number of BHPetrol stations will grow by 8 to 10 per cent next year.

Shareholders of both Boustead Holdings Bhd and Boustead Properties Bhd approved the setting up of the REIT at a meeting yesterday, while the Securities Commission gave its nod a day earlier.