KUALA LUMPUR (Oct 27): WTK Holdings Bhd is buying a plantation company and palm oil mill in Sarawak for a total of RM250 million in a related party transaction (RPT).

Its wholly-owned unit WTK Alpha Sdn Bhd, is acquiring the entire equity interest or 23.2 million shares in B.H.B Sdn Bhd (B.H.B) — which is involved in the business of planting and management of an oil palm plantation in Miri — from Harvard Master Sdn Bhd (HMSB) for RM237.5 million.

Meanwhile, WTK Alpha is also buying the palm oil mill in Sungai Niah in Miri, together with its associated plant and machinery, from Sibu-based HMSB for RM12.5 million.

Notably, the two exercises are deemed as RPTs as WTK managing director and shareholder Datuk Seri Patrick Wong Haw Yeong is also the director of WTK Alpha, B.H.B and HMSB.

WTK Alpha and HMSB entered into two agreements for the acquisitions on Thursday (Oct 27), WTK said in a stock exchange filing, adding that the total cash consideration of RM250 million will be settled through a combination of internally-generated funds and bank borrowings.

A check on WTK’s financial statements show that the company’s cash and bank balances stood at RM375.06 million as on June 30 this year, whereas its total borrowings amounted to RM243.72 million.

While WTK is sitting in a zero-gearing, net cash position of about RM130 million, it should be noted that the total value of both acquisitions — amounting RM250 million — is almost equivalent to the company’s market capitalisation of RM240.65 million, based on its closing price of 50.5 sen on Thursday.

The WTK Group has an established presence in the oil palm cultivation business in Sarawak which includes upstream oil palm plantation activities and downstream palm oil mill operations.

The group’s plantation segment recorded a profit before tax of RM18.9 million in the financial year ended Dec 31, 2021 (FY21) compared to a loss before tax of RM38.9 million in FY20.

WTK said the proposed acquisitions are in line with the group’s long-term strategy to further expand its oil palm plantation business by acquiring new land banks to gain a larger foothold in the future production of fresh fruit bunch (FFB) in view of the scarcity of sizeable and suitable oil palm plantation land in Malaysia.

“This will expedite WTK Group’s strategic shift to become a more dominant plantation player with an enhanced public-listed profile and provide WTK Group with an additional stream of income, thus reducing its reliance on the timber business which is currently facing headwinds,” it said.

The group said the timber business continues to face challenges with log production anticipated to slow down due to declining number of available natural logs and stricter operational requirements relating to timber certification.

WTK believed the exercises are expected to contribute positively to the group’s revenue and earnings in the long run. The board expects the proposed acquisitions to be completed in the first quarter of 2023.