Guo Hernian wants to be the Sugar King of Asia

 

Malaysia's richest man, Kok Hock Nin, who announced in October last year that he would no longer be the local sugar king, has been actively deploying his international sugar footprint during this time, and this time he has taken a key step into the international sugar industry through his Singapore-listed company, Fung Yick International, which has spent A$1.75 billion on acquiring the sugar business of Australia's CSR.

　　

 

Fung Yick International becomes the new base of King Sugar

　　Fung Yick International has announced the A$1.75 billion acquisition of CSR's sugar business in Australia, which is the first step into the international sugar industry after Kwok Hak Nin won the Malaysian Sugar King crown, and Fung Yick International is expected to become a new base for the King to start overseas business.

　　This is also Guo Hernian in the withdrawal of the Malaysian sugar industry, launched the first overseas business development activities, the market widely speculated that he may be gearing up for the entry into the Chinese sugar industry "warm-up".

　　

 

Moving into China

　　Fung Yick International has agreed to spend A$1.75 billion to acquire Sucrogen, the sugar unit of Australia's CSR, following an offer by China's Bright Food Group to buy the business.

　　The offer includes A$1.35 billion in cash and the assumption of A$403 million in net debt, Fung Yick International said.

　　Sydney-based CSR is known to be the world's second largest exporter of raw sugar.

　　The acquisition of Sucrogen will give FSI access to plants that account for 451 TP3T of Australia's raw sugar processing capacity and about 41 TP3T of international trade, according to reports.Sugar prices could rise 301 TP3T this year due to increased demand, according to previous forecasts by Brazilian firm Copersucar SA.

　　"Sucrogen is a good strategic fit with FSI's existing portfolio of high-quality processed agricultural products," noted Kok Kong Fung, chief executive officer of Singapore-based FSI, in the release.

　　Currently, Fung Yick International is one of the largest listed companies in Singapore and is controlled by Kwok Hock Nin's nephew, Kwok Kong Fung.

　　

 

Offloading of Tamar Sugar in October last year

　　Guo Hernian is in October last year, suddenly announced to 1.25 billion ringgit, off the sale of its Malaysian sugar industry to the Federal Land Development Holdings subsidiary - Federal Global Ventures Holdings, this move caused the market a shock, "Sugar King" out of Malaysia, the matter. The market has also questioned the ability of Malaysia to retain "foreign investment".

　　In addition to the divestment of the business to Federal Global Ventures Holdings, Kok also divested its stake in 20% in a sugar-related company for more than RM200 million at that time, making a full exit from the Malaysian sugar industry.

　　Some analysts noted that Kwok Hak Nin had lost interest in the business given that sugar prices were regulated by the government, and were weary of media reports suggesting that Kwok had benefited from the government monopoly on the business.

　　Some analysts in the market have also suggested that another motive for Kwok to offload his business may also reflect his desire to transfer some of his business to the younger generation.

　　In fact, the sale of the sugar industry is not the "first time" that Kok Hock Nin has withdrawn from Malaysia, as Kok Hock Nin has done so four times since 2005, when he sold his Johor industrial company, Rainbow, to the National Investment Corporation. In addition to sugar, another high-profile deal took place in 2006, when FSI acquired PPB Palm Oil, one of the subsidiaries of the Kok-controlled PPB Group, for US$2.7 billion, along with two unlisted companies.

　　

 

Expansion activities favored Next year's net profit expected to improve 5%

　　Market analysts are optimistic about FSI's expansion activities, saying that given FSI's asset size, even large acquisitions won't hurt the balance sheet and are expected to boost FY2011 net income by about 5%.

　　Qiaofeng Investment Research is highly bullish on the campaign, noting that Kuo Hernandez is kicking off the expansion campaign for the sugar industry at a faster-than-expected pace.

　　

 

Sugar may be injected into Fung Yick International

　　"Entering the sugar industry is a positive move, and it opens a door for Guo Hernian to inject sugar into Fengyi International.

　　It appears that Guo Hernan to continue to dominate the international sugar industry and raises the possibility that Guo Hernan will inject the sugar industry into Fortune International."

　　

 

Indonesia has 200,000 hectares of sugarcane plantations

　　Guo Hernian is also known to have about 200,000 hectares of sugarcane plantations in Indonesia.

　　In addition, the large amount of capital required for the immediate acquisition of Australia's CSR Ltd, however, analysts are not concerned that this will have a serious impact on the cash-rich Fortune International.

　　The analysts explained that the acquisition comprised of approximately RM3,663 million in cash and assumption of approximately RM1,093 million in net debt, equivalent to a 17.3 times principal-to-earnings ratio and a 1.78 times price-to-tangible-net-assets ratio.

　　"This amount, however, is not the final price, as Fung Yick International will also have to assume the loan borrowed by Sucrogen from April 2010, which is not included in the RM4.7 billion purchase price."

　　

 

High debt ratio does not hurt cash position

　　Currently, FSI's net debt as of March 2010 totaled $4.973 billion, which means that in order to acquire this Australian company, FSI's net debt ratio will be increased from 4.37% to 5.67%, but FSI's total cash is as high as $5.854 billion, so it is believed that it will not affect FSI's balance sheet.

　　"If Sucrogen maintains its FY2009 performance, we expect the acquisition activity to boost FSI's net earnings, by 5% in 2011, if Sucrogen maintains its FY2009 performance," said QF Investment Research.

　　On the other hand, Bent Porter, a strategist at IG Markets, noted in an email response to Bloomberg that "a leading investment bank valued the bid at A$1.5 billion, so it's a very good offer for shareholders."

　　

 

Kwok Hak Nin's record of selling local businesses in recent years

　　

Offloads 5.09% stake in Rainbow

　　In May 2005, NII announced a proposal to compulsorily acquire its outstanding 50.71 TP3T Rainbow equity interest at RM0.77 per share for a total value of RM283.7 million.

　　In line with the investor's plan, the Kwok brothers, controlled by Kwok Hak Nin, later offloaded 36.94 million shares or 5.09% in Rainbow.

　　The company was officially delisted from Bursa Malaysia on August 15, 2005, following the completion of the Rainbow privatization program of the National Investment Corporation (NIC).

　　

Off-sale of PPB palm oil

　　Fung Yick International merged at the end of 2006 by exchanging 2.3 shares for 1 share of PPB Oil Palm, or a valuation of approximately RM9.046 per share of PPB Palm Oil, with the entire offering amounting to more than RM6.3 billion.

　　In the second quarter of 2007, FSI officially completed the acquisition of PPB Palm Oil and on May 31, 2007, it was delisted from Bursa Malaysia.

　　

Sugar off-take

　On October 30, 2009, Kok Hock Nin, through the PPB Group, announced the complete divestment of Malayan Sugar Mills to Federal Land Development Holdings (FLDH) for a total cash value of RM1,221.16 million.

　　Meanwhile, PPB Group has also offered to divest its stake in Perlis UniTuber Sugar Mill 50%, or equivalent to 6 million shares, for RM26.31 million in cash at RM1 per share.