4 reasons why Wilmar must rethink its Papua palm project

Especially as it owns 53.74% equity interest.

According to DBS, Wilmar recently announced the sale by Noble Resources, a wholly owned subsidiary of Noble Group, of a 53.74% equity interest in Noble Plantations to Newbloom, a wholly owned subsidiary of Wilmar.

The sale and purchase is subject to various regulatory approvals. On completion, JVCo will be 53.74% owned by Wilmar and 46.27% owned by Noble.

Noble and Wilmar have agreed, through JVCo, to form a Papua focused, strategic joint venture in order to develop and operate palm projects to produce and sell CPO and its by-products.

Here's more from DBS:

JVCo presently owns a majority interest in PT Henrison Inti Persada, which in turn owns 22,953 Ha of land for palm production in Papua, Indonesia.

In addition, through JVCo, the parties intend to jointly explore and develop further palm oil opportunities in the Papua region, to add to the existing portfolio.

This JV would have no significant impact on Wilmar's earnings; as we understand it is currently in early stages of development.

In our view oil palm estates would be difficult to develop in Papua due to: (1) remote location; (2) heavy infrastructure investment needed; (3) unclear land licensing regulation in Papua; and (4) estates in Papua needs significant economies of scale (significantly more than 23k ha) to make the investment worthwhile.