(MENAFN- ProactiveInvestors) South East Asia’s palm oil giants are cooking up expansion plans and London-listed firms look to be the perfect ingredient.
This week one of Malaysia's largest conglomerates Sime Darby wrapped up a £1.1bn takeover for New Britain Palm Oil () – paying an 85% premium for its shares.
It comes as Indonesia the biggest producer is imposing stricter foreign ownership laws on agriculture and less land is available in Malaysia.
To make the versatile commodity used for cooking cosmetics and biofuel natural forests are converted to oil palm plantations.
Malaysia and Indonesia produce close to 90% of world exports but space is running out.
New Britain’s 135000 hectares in neighbouring Papua New Guinea proved too tasty to resist.
They add to Sime Darby’s total land bank of almost one million hectares spread out over five countries.
The Malaysian giant now plans to delist NBPO in London and float it in Kuala Lumpur or Singapore
Following the deal Finncap analyst Raymond Greaves wouldn’t be surprised if more London-listed firms head east.
“New Britain was a large independent player albeit based out of Papua New Guinea” he told Proactive Investors.
“The premium paid for NBPO's assets reflects the fierce competition for developed oil palm projects.
“Sime Darby paid around US$25000 dollars per hectare; the average is US$18000-US$19000.”
A host of London-listed players now look very appealing according to Greaves given that they trade at a discount to major players in Asia.
Potential targets include AIM’s MP Evans Group () REA Holdings (LON:RE.) and ().
MP Evans like rival REA Holdings has previously considered a listing in Jakarta - partly to mitigate the risk of Indonesia’s 30% foreign ownership laws of plantations.
Shares in each have risen over the past month and jumped on news of the New Britain deal.
When markets first heard of the New Britain takeover back in October shares in () an Ivory Coast-focused palm oil producer also rose sharply.
Another catalyst may be the fact that like most commodities palm oil has been under pressure of late.
Vegetable oils pricing is closely correlated to crude albeit they have historically traded at a premium.
A metric ton of palm-oil costs US$639 at the moment. The same amount of Brent crude roughly nine barrels costs US$540.
Brent crude is still worth almost 50% less than it was six months ago despite recent gains.
The significant decrease has contributed to a fourth year of falling crude palm oil (CPO) prices as a result of weak exports and record levels of production for competing vegetable oils.
There was a bumper harvest of soya beans - an alternative to palm oil - in the US which has also hurt demand.
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