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 Mahamad Rodzi Abdul Ghani
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 Wilmar stock soars on Malaysia palm oil deal

15/12/06 SINGAPORE, (Reuters) - Investors cheered Wilmar's multi-billion dollar purchase of Malaysian agricultural assets on Friday, sending its stock up 27 percent on hopes it will profit from high palm oil prices due to demand from China and India.

Wilmar's bid to create the world's second-largest palm oil maker by buying assets from the Kuok Group and others comes less than a month after three Malaysian state-controlled plantation firms created the world's top palm oil group.

"The M&A scene in the plantation sector is hot," said Credit Suisse analyst Tan Ting Min who rates Wilmar stock "outperform".

The trend for merger and acquisitions -- underscored by last month's tie-up of Malaysian firms Sime Darby , Kumpulan Guthrie , and Golden Hope -- reflects rising interest in alternative energy sources, or biofuels, as crude oil prices remain high.

Global palm oil prices have also surged and are up more than 30 percent this year as biodiesel plants sprout at a dizzying pace, with nations from Europe to Asia seeking ways to cut dependence on crude oil.

"From February onwards, we expect palm prices to see an upward trend," said Amir S. Chitta, marketing director at Singapore-based trading firm Agritrade International. ADVERTISEMENT

"We expect good demand from India and China. Palm exports from Malaysia and Indonesia will be better than expected -- both for food and for energy use."


Malaysian palm oil is hovering around 1,860 ringgit ($525) a tonne. Leading palm oil analyst Dorab Mistry, whose projections are closely watched by the market, forecast prices to climb as high as 2,400 ringgit a tonne in the first quarter of next year.

Shares in Wilmar, which had been suspended from trading Wednesday and Thursday, were 24 percent higher at S$2.12 at the 0430 GMT lunchtime break.

Wilmar said on Thursday it would buy Malaysian plantation and agri-business assets from the Kuok Group and others, and that merged group would have a stock market value of about $7 billion.

Goldman Sachs on Friday welcomed the tie-up and raised its investment recommendation for Wilmar shares to "buy" from "neutral" with a 12-month share price target of S$2.12.

"We...see strong potential synergies with the merger," Goldman analysts Patrick Tiah and Yoke Fong Chee said in a note to investors.

The deal will give the merged group a strong presence in Southeast Asia and China, which is emerging as the world's biggest consumer of edible oils.

"We believe this is a highly positive deal and would create a formidable food and palm oil focused conglomerate," CLSA analyst Justin Yeoh said in a note sent to clients.

"Coupled with the additional land bank and capabilities in Indonesia, Wilmar will raise the high barrier to entry in the industry."

In Kuala Lumpur, shares of Malaysian plantation firm PPB Oil Palms and its parent, PPB Group , rose sharply after the Wilmar bid.

PPB Oil shares were up 20.7 percent at 10.80 ringgit, while PPB Group shares were up 9.2 percent at 5.35 ringgit.

Malaysian Palm Oil Board ( MPOB ) Lot 6, SS6, Jalan Perbandaran, 47301 Kelana Jaya, Selangor Darul Ehsan, MALAYSIA.
Tel : 603 - 7802 2800 || Fax : 603 - 7803 3533