Why the Kangaroo Island Plantation (ASX:KPT) share price is rising today

The Kangaroo Island Plantation share price has risen today after the company rejected a $20 million offer to buy its land on Kangaroo Island.

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The Kangaroo Island Plantation Timbers Ltd (ASX: KPT) share price has risen today after the company's board rejected a $20 million offer to buy its land on Kangaroo Island.

The Kangaroo Island Plantation share price has risen 4.9% to $1.07 at the time of writing. 

Kangaroo Island Plantation is a forestry company and timber producer on Kangaroo Island, off the coast of South Australia. It manages a wholly-owned portfolio of hardwood and softwood forestry plantations, growing on former agricultural land. 

The land it owns is strategically located in high rainfall areas that are highly suitable for growing, allowing the company to potentially capitalise on increasing land values. 

Kangaroo Island Plantation refuses low-ball offer

The $20 million offer from KI Phoenix was for all of Kangaroo Island Plantation's land assets on Kangaroo Island. This has sparked uncertainty in the Kangaroo Island Plantation share price recently.

Kangaroo Island was decimated by bushfires in January last year that wiped out up to 95% of its animal habitats. According to the company, this has led to "an increase in interest by those seeking to opportunistically acquire land at distressed prices". 

Kangaroo Island Plantation lost a huge portion of its logging plantations in the bushfire and has since received more than $62 million in insurance payouts.

What management said

The company's managing director Keith Lamb said land values on the island far exceeded the offers the board was receiving:

While the company is open-minded to approaches it receives, the board is squarely focussed on maximising shareholder wealth and with this in mind, offers are considered on merit. This resolve has not altered since the tragic fires of 2019-20.

The land value recorded on KPT's balance sheet is $59.28 million, based on independent expert advice provided by leading rural valuers. The latest valuation was set at June 2020, following the fires of 2019-20 and is benchmarked below equivalent land value on mainland South Australia. Since June 2020 land values around the country have risen.

Kangaroo Island Plantation share price snapshot

The Kangaroo Island Plantation share price is today recovering after falling 1% yesterday and 4.9% on Tuesday. Overall, it's now up more than 7% this week and 9.18% higher over the past 12 months. However, shares in the forestry company have fallen 14% since the start of 2021.

Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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