KUALA LUMPUR (May 3): Priceworth International Bhd said Forest Management Unit 5 (FMU5), a timber concession area it is acquiring in Sabah, has been valued at RM433.8 million.

The valuation, it said, is RM173.8 million or 66.85% higher than the RM260 million it is paying for FMU5, which has a net concession area of 88,920 hectares.

The timber and sustainable forestry group added in a statement today that it holds a cash option that, if exercised, could further reduce the acquisition price to RM235 million.

Priceworth is seeking shareholders’ approval to acquire FMU5, which is among Sabah’s top 10 largest forest management areas, and has 79 years remaining on the 100-year licence to manage, extract and sell timber from the area.

The extraordinary general meeting will be held on May 22.

Priceworth has also proposed a renounceable two-for-one rights issue with bonus shares to raise proceeds of RM102.37 million, which will be used to repay bank borrowings and working capital.

The rights shares, to be issued at 5 sen each, will come with one bonus share for every two rights shares subscribed.

Priceworth said the acquisition of FMU5 will cement its position as the leading integrated timber player in Sabah, with an entire value chain comprising upstream and downstream assets complemented by its in-house expertise, knowhow and market knowledge.

“With the proposed transformative acquisition of FMU5, we are bullish on the future outlook of the company and the group,” it said, as it envisages the FMU5 to provide a sustainable supply of logs for the foreseeable future.

“Thus, the principal business segment of logs trading, sawmill operations and plywood manufacturing will be further enhanced with our contributions and margins improving beyond the breakeven level which we have been experiencing for the past few years.”

Last month, Priceworth saw its highest production volume since 2011, when Sabah adopted a new forestry policy on Sustainable Forest Management in 2010. In March, its log production nearly touched 25,000 cubic metres, a 71% increase from a year ago.

Priceworth had also signed a Memorandum of Understanding with Chinese manufacturer Foshan Zhengsen Woodworking Co to supply container flooring worth RM600 million over a five-year period and averaging RM120 million per year.

Priceworth shares closed unchanged at 20 sen today, giving the group a market capitalisation of RM204.75 million.