Wilmar/ Kencana

Wilmar/ Kencana: Wilmar confirmed that it would buy 20% stake in Kencana Agri for $80m, or $0.35/sh. The placement to Wilmar will comprise 150m new shares in Kencana, and 80m vendor shares from Kencana Hldgs. Kencana to use $52.5m injection to accelerate its planting programme and expansion plans, and may work with Wilmar to lower operating costs via streamlining of supply chain mgt and procurement of raw mat’ls in Indonesia...

Acquisition is small by Wilmar’s standards, and not likely to have significant impact on its financials. But move still positive as it helps Wilmar to secure upstream supply, at a time when plantation land bank is becoming increasing hard to come by, in view of recent focus on sustainable farming. Separately, the transaction places a near term floor for Kencana’s share price, and values it at prospective 23.3x PE.