Leweko Resources Bhd ... Apr 09

A largest timber concessionaires in Malaysia, excited the plantation business by disposing of its three wholly owned subsidiary involved in oil palm cultivation for RM35.65 million cash, leaving the company with only its timber business.

It is selling its four 60 year sublease oil palm plantations in Perak.

The reason is because its executive director points to the rise and fall in CPO prices. He viewed that CPO price will remain high, going forward, they tend to overlook the fact that the corresponding cost (especially fertilizers and transport) has also increased substantially since 2006 and this eats into the profit margin.

The proceeds from the disposal will be utilized as working capital for its timber operations and for investment opportunities that may arise from time to time.

The company is looking at investment opportunities related to its timber business.

It is in a net debt position with total borrowings of Rm18 million as at Dec 31, 2008.

It will have a net cash of about Rm15 million upon the completion of the proposed disposal, with all things being equal.

Almost 90% of its revenue and assets are derived from and employed in its timber operations.

The company still has significant forest concessions and a secure supply of timber logs. Harvesting has been deferred for the time being due to the poor selling prices but there will be substantial points when timber prices recover.