Archive for May, 2012

‘CPO prices will rebound’

PLANTER Kuala Lumpur Kepong Bhd (KLK) is hopeful of palm oil prices bouncing back to RM3,300 a tonne, as orders for the food ingredient pile up in the face of tight global supplies.

The third-month benchmark crude palm oil futures on the Malaysian Derivatives Exchange fell RM67 to close at RM3,111 a tonne yesterday. KLK’s chief executive Tan Sri Lee Oi Hian said palm oil prices, despite having slipped from a peak of RM3,600 a tonne in mid-April, is likely to sustain and trade up to RM3,300 a tonne again.

“Prices should hold up in the coming months. Stocks are tight,” he told Business Times at the sidelines of Invest Malaysia 2012 held here yesterday.

He concurred with commodity reports stating tight global edible oil stocks is caused by South America’s drought on soya harvests and a lower rapeseed crop output in India.

“We’re also receiving more orders for Ramadhan in July. Based on these strong fundamentals, we think palm oil prices are likely to recover to around RM3,300 a tonne,” he said.

KLK has, so far, planted up 205,848ha in Malaysia and Indonesia. The plantation business makes up 77 per cent of the firm’s profits.

“We replant using tissue culture ramets in our Malaysian estates as this improves yield per hectare. We also carry out 5,000ha to 8,000ha new plantings in Indonesia every year,” Lee said.

“Going forward, our earnings growth will be driven by the rising yields of our young areas,” he added.

Rising yields in the field has also contributed to rising oil extraction rates (OER) at the mills. In 2008, KLK’s OER was only 20.5 per cent. To date, it has gone up to 21.8 per cent.

KLK is favoured over larger rivals like Sime Darby Bhd and IOI Corp Bhd, thanks to its younger oil palm tree profile.

BIMB Securities analyst Ng Keat Yung said more than two thirds of KLK’s oil palms are of young to prime age. This suggests KLK estates can withstand and profit from erratic weather, which has a negative impact on older oil palms.

“We’re also positive on the disposal of Crabtree & Evelyn,” he said, adding the management can now put more time and resources in oil palm planting and the manufacture of oleochemicals.

“We like that KLK is putting up three refineries and an oleochemical plant in Indonesia to leverage on the Indonesian palm oil taxes that favours downstream investments,” he said.

Ng commented that KLK’s cashflow is strong and sufficient to cover its borrowings. “Their debt is manageable. Gearing is at a minimal of 0.06 times, it’s healthy. Should the company wish to embark on any sizable acquisitions to boost its plantation landbank, they have no problems gearing up,” he said.

Yesterday, KLK’s shares closed 12 sen higher at RM22.10. The BIMB Securities analyst recommended a ‘buy’ and estimated the shares can climb to RM25.10 in the longer term.

Boustead Q1 earnings up

KUALA LUMPUR: BOUSTEAD Holdings Bhd’s first quarter profit rose 29 per cent to RM144.6 million from RM112.2 million a year ago. This was mainly driven by higher profits in its pharmaceutical, property and banking businesses.

In its filing to the stock exchange yesterday, Boustead said revenue jumped 51 per cent to RM2.4 billion from RM1.59 billion. Earnings per share added up to 13.98 sen, much higher than 10.85 sen previously.  The group declared an interim dividend of 7.5 sen.

Boustead group managing director Tan Sri Lodin Wok Kamaruddin, said in a statement, “Except for one division, all other divisions delivered on the bottom line”. He noted that despite an RM18 million gain from the sale of aircraft by MHS Aviation, Boustead’s heavy industries division suffered RM5 million losses as the work on the second generation patrol vessels has yet to move into full swing.

Lodin, who is also deputy chairman of the group, said the most significant improvement was driven by pharmaceuticals. This business raked in RM35.7 million in profits, four times of last year’s RM9.1 million. The significant increase is mainly due to the consolidation of Pharmaniaga Bhd into the group’s portfolio.

For the three months to March 2012, Boustead’s oil palm business posted lower profits at RM92.2 million compared to RM99 million a year ago. This was because the average palm oil selling price was RM3,143 per tonne, 11 per cent lower than RM3,541 per tonne recorded in the first quarter of 2011.

Boustead’s trading and manufacturing profits rose 22 per cent to RM35.1 million, thanks to higher sales volume and stock holding gains. 

Its banking business held under Affin group did well when its profits more than doubled to RM26.1 million.

Earlier this year, the group sold off a piece of vacant land and this bumped up its property development division’s profits to RM40 million, more than three times that of RM12 million previously.

On this year’s outlook, Lodin said Boustead is cautiously optimistic of chalking up another year of good profits.

IOI on the prowl for more Indonesian estates

KLUANG, JOHOR: IOI Corp Bhd, which now has RM3 billion in cash reserves, is on the prowl to acquire more oil palm estates in Indonesia. 

“We’re always looking at opportunities to increase our plantation landbank. This sizeable acquisition is likely going to be in Indonesia,” said executive director Lee Yeow Chor. He, however, declined to elaborate on the timing of the impending purchase.

Lee then signalled that he is optimistic about the prospects of IOI’s main-stay palm oil business, following drought-like weather in the last two years that resulted in challenging conditions for plantation companies.

The onset of dry conditions wrought havoc on the productivity of the country’s oil palm trees. This meant that IOI, which has a matured oil palm area of about 140,000ha, is not seeing much growth in oil palm fruit production in the current year ending June 2012. This, Lee said, is having an impact on palm oil prices.

“Lower production will not have an effect on our financial performance because prices will more than compensate for it,” he said after a tour around its Pamol estate complex here yesterday. He said palm oil prices had averaged around RM3,100 per tonne in the first half of this year.

In the last six weeks, palm oil prices have been on the decline from a peak of RM3,600 a tonne. Yesterday, the third-month benchmark palm oil futures on the Malaysian Derivatives Exchange closed RM61 higher at RM3,130 per tonne. In response, Lee said: “The spike in prices at the beginning of the year was overdone. As the market factors in the eurozone crises, we saw some sell down. 

“In the coming months, however, we should see some price upside. This is because stocks are tight and orders are coming in for Ramadhan in July. Based on these fundamentals, we are confident prices will recover to around RM3,200 per tonne,” he added. 

As early as 2007, IOI invested US$62.63 million to take up a 33 per cent stake in PT Bumitama Gunajaya Agro. This was part of its plan to participate in Indonesia’s oil palm expansion and ensure upstream profit growth.

Today, Bumitama has an agriculture landbank of 191,948ha, of which 119,162ha is already planted up with oil palms. Of that total area, 87,851ha is held under the company and 31,311ha under the smallholders or plasma schemes.

Lee, who is a member of Bumitama’s board of directors, said the group is aggressively stepping up its plantation development programme in Indonesia. The pace of planting is expected to pick up in the coming years. “We aim to plant at a rate of 10,000ha per year,” he said.  

On its property business, Lee indicated that IOI will spin off the arm to be re-listed. “Yes, we plan to list it in Singapore but we’ve not decided on the timing.”

Offer prices for QSR, KFC ‘not likely to be increased’

KUALA LUMPUR: The offer price to take private QSR Brands Bhd and KFC Holdings (Malaysia) Bhd is unlikely to be revised upwards.

In December 2011, Johor Corp Bhd (JCorp) and private equity firm CVC Capital Partners announced their intention to buy QSR shares at RM6.80 each and RM3.79 per warrant. They also offered RM4 per KFC share and RM1 per warrant.

To a query if minority shareholders of QSR and KFC were happy with the offer prices, QSR and KFC deputy chairman Ahamad Mohamad replied, “everyone always wants higher offer prices. The advisers of this exercise; OSK Investment Bank, Am Merchant Bank and Affin Investment Bank, had advised that the offer prices are fair and reasonable”.

He was speaking to reporters after the companies’ shareholders meetings held here yesterday. Last week, the Employees Provident Fund (EPF) announced it was participating in the buyout of QSR and KFC alongside JCorp and CVC Capital.

Ahamad, who is also Kulim (M) Bhd managing director, said the privatisation of QSR and KFC would be facilitated via Kulim, which is 56 per cent owned by JCorp. Kulim has a 53.9 per cent stake in QSR and KFC is a 51 per cent unit of QSR.

He then estimated that this RM3.6 billion exercise will be completed by October 2012. “Judging from the recent price gain in Kulim shares, it can be inferred that many shareholders are receptive.” Two days ago, Kulim was the top gainer on Bursa Malaysia, rising 29 sen to RM4.55 with 1.29 million shares done at market close. Kulim-CE rose six sen to 20 sen.

Last week, QSR and KFC announced the execution of the definitive agreements for their planned privatisations. This is an important milestone because unless and until the definitive agreements are signed, only then the various extraordinary general meetings can be called for Kulim, QSR and KFC shareholders to vote on.

QSR and KFC also announced that Kamaruzzaman Abu Kassim, who is currently JCorp chief executive officer and president, had resigned from his position as chairman and director in both QSR and KFC to reflect good corporate governance. Datuk Ayub Mion has been redesignated and appointed chairman of QSR and KFC.

QSR is the franchisee for Pizza Hut with more than 260 restaurants in Malaysia and Singapore. Through its unit KFC Holdings, the cash rich QSR is also the operator of more than 640 KFC restaurants in Malaysia, Singapore Brunei and India.

More using palm oil vitamin E

A LIFE-SAVER: As more medical researchers all over the world discover the unique ability of palm oil vitamin E in seeking and killing cancer cells, Malaysia steps up funding for such studies in the hope of saving more lives. Ooi Tee Ching writes.

SINGAPORE: Dr Fong Chee Wai picks up a test tube of Vitamin E and recounted that many people think the Vitamin E is singular when this oil soluble nutrient is actually a family of eight siblings.

“The complete vitamin E family is made up of four tocopherols and four tocotrienols. Soft oils like olive, soya, canola and sunflower only contain tocopherols. Tropical oils like palm, rice bran and coconut, however, have both tocopherols and tocotrienols,” he said.

Over the last 30 years, scientific studies have shown that palm oil vitamin E, particularly the tocotrienols, is a far more potent antioxidant than tocopherols.

In an interview with New Sunday Times, he explained that the difference between tocotrienols and tocopherols is the “tail” on the vitamin E molecule.

“Tocopherols have long saturated tails while tocotrienols have unsaturated tails,” said the scientist from Davos Life Science Pte Ltd, which is fully-owned by Ipoh-based plantation company Kuala Lumpur Kepong Bhd.

The unique structure of tocotrienols enables them to do many things that tocopherols cannot do.

This includes easier access to all types of cells, more powerful anti-oxidative function in cells, the ability to penetrate internal organs, and the activation of a wide variety of gene signals.

“It is these unique biological activities in tocotrienols that help in body cell regeneration and make it able to protect healthy cells. More importantly, there is also increasing evidence of these potent antioxidants possessing warrior-like ability to zealously hunt down and kill cancerous cells.”

It is this life-saving prospect from cancer that prompted the government via Malaysian Palm Oil Board (MPOB) to boost funding for palm oil vitamin E trials.

In a separate interview, MPOB chairman Datuk Seri Shahrir Samad said, “We’re encouraged that more medical researchers are looking into the potential of palm tocotrienols in the prevention and eventually, treatment of cancer.”

He had just returned from a working visit to the Peter MacCallum Cancer Centre (PMCC) in Melbourne with Davos Life Science which is supplying palm tocotrienols for the cancer trials.

PMCC is Australia’s only public hospital dedicated to cancer treatment, professional oncologist training, research and education. It is one of the few cancer treatment facilities in the world that has a fully-integrated clinical and laboratory programme situated alongside a hospital.

Last year, Breast Cancer Network Australia estimated that 14,300 women and men in Australia were diagnosed with breast cancer, making it the most common killer disease.

Until now, the cure for cancer seems elusive because cancer cells are known to mutate and manoeuvre around drugs.

In a pioneering move, PMCC is embarking on fluorine labelling on palm tocotrienols to trace how this nutrient travels in the body.

“By marking the tocotrienols and using high resolution imaging, we hope to see how this team of super-soldiers fight and block the many pathways of cancer cells. It is through such collaboration with PMCC we can gain a deeper understanding of the health benefits of palm oil vitamin E,” said Shahrir.

Tocotrienols are usually extracted from palm oil because the oil palm tree is able to produce the highest concentrate compared to other oil crops.

Every year, Malaysia exports some RM50 million worth of palm oil health supplements, mainly to Europe, the United States, Canada and Japan. A kilogramme of palm oil vitamin E sells for US$500 (RM1,570).

‘These palm fats are all natural’

MALAYSIAN Palm Oil Board chairman Datuk Seri Shahrir Samad answers a few frequently asked questions.

1. What food products contain palm oil?
Food scientists like palm oil’s natural semi-solid feature because they can fractionate and come up with many kinds of food ingredients like cooking oils, margarine, shortening, vegetable ghee, bakery fats, chocolates, hot beverages, coffee creamers, and ice-cream.
The best part is these palm fats are all natural. They need not be hydrogenated and therefore, do not contain the deadly trans-fat. Due to its excellent stability, palm olein is the world’s No.1 frying oil for instant noodles, French fries, potato crisps, doughnuts and snacks.

2. Does palm oil contain cholesterol?
No. Palm oil, like most other vegetable oils and fats, contain only traces of cholesterol (<50 μg/gram or <5 ppm). This amount is so low that it has no significant physiological effects on health. Therefore, it is considered “cholesterol-free”.

3. Will palm oil consumption raise my blood cholesterol level?
No. Peer-reviewed studies conducted in the United States, Europe, Australia and Asia have firmly established that palm oil tends to be “neutral”. What this means is palm oil does not raise nor lower blood cholesterol levels.
It only has traces of the cholesterol-raising lauric plus myristic acids, as well as possesses a unique fat molecule configuration involving its major saturated fatty acid, palmitic acid, which renders the oil non-cholesterol raising.
Besides, palm oil has a high content of vitamin E variants called “tocotrienols” which have a statin-like cholesterol lowering action.

4. What are tocotrienols?
Tocotrienols make up half of the vitamin E family of eight siblings. The other four family members are tocopherols. Over the last 30 years, scientific studies have shown that tocotrienols is the more potent antioxidant than tocopherols.
This is because tocotrienols, and not tocopherols, are able to:
— lower blood cholesterol levels (statin-like action),
— regress atherosclerotic plaques in stroke patients,
— inhibit entry of white blood cells into arterial wall to become devouring phagocytes, thereby preventing early plaque formation,
— inhibit blood clot formation in the bloodstream (anti-thrombotic effect),
— protect skin from damage by ultra-violet rays of the sun (prevent pre-mature ageing), and
— kill cancer cells (apoptosis)

5. Where can you find tocotrienols?
Tocopherols are sourced from oilseeds such as soya oil, canola and sunflower, while tocotrienols are only available in high concentrates in palm oil.

Felda Global identifies foreign partners

This is written by my colleague in London, Zaharah Othman.
LONDON: FELDA Global Ventures Holdings Bhd (FGVH) has chosen heavyweights Louis Dreyfus Commodities Asia Pte Ltd and Vitol Group as its strategic partners in trading and logistics.

The agreements with the two global trading houses were signed during Prime Minister Datuk Seri Najib Razak’s working visit here yesterday.

The Prime Minister said the collaborations will help FGVH emerge as one of the world’s biggest and respected commodity companies. 

“We want FGVH to emerge as a commodity company that is among the biggest in terms of plantation to marketing,” Najib said.

Headquartered in Rotterdam, the Netherlands, Louis Dreyfus companies are present in more than 53 countries. 

While it has agreed to take a minority stake in FGVH, the trading giant said, this is conditional on a successful initial public offering (IPO) of FGVH at Bursa Malaysia next month.

Louis Dreyfus did not mention the amount of stake it would take up in FGVH but it was recently reported that this major global trader of cotton, grains, sugar, coffee and oilseeds, is likely to take up no more than 5 per cent. 

FGVH’s public debut, slated for end-June, promises to be the world’s second largest IPO this year after Facebook Inc’s estimated valuation of up to US$100 billion.

“This strategic partnership with FGVH is a major step in Louis Dreyfus Commodities’ development in Asia. It spells a unique opportunity to cement its role as one of the largest integrated players in palm oil activities,” Louis Dreyfus said.

The proposed transaction involves both a strategic cornerstone investment in the IPO and the creation of two joint ventures, it added.

Meanwhile, FGVH and Vitol Group is set to establish a joint-venture company in Kuala Lumpur with the former as the majority shareholder.

“This strategic alliance between FGVH and Vitol is line with FGVH’s growth strategy in energy trading. This is one of the channels for both upstream and downstream marketing that is intended to transform FGVH into a truly global player,” said FGVH group president and chief executive officer Datuk Sabri Ahmad.

Vitol group president and chief executive officer Ian Taylor said: “This collaboration enhances our already significant presence in Malaysia, which is currently focused on our existing energy trading business and terminal operations.”

QSR, KFC buyout looms as JCorp chief quits boards

This is written by my colleague Adeline Paul Raj.

KUALA LUMPUR: Johor Corp Bhd president and chief executive officer Kamaruzzaman Abu Kassim has resigned from his post as chairman and director of both QSR Brands Bhd and KFC Holdings (M) Bhd, paving the way for the buyout of the two listed entities.

JCorp, which is Johor state government’s investment arm, owns 55.9 per cent of Kulim (Malaysia) Bhd.

Kulim, in turn, has a 53.9 per cent stake in QSR. KFC is a 51 per cent unit of QSR.

“With Kamaruzzaman’s resignation, they have moved closer towards the target sales and purchase agreement by May 21. 

“The privatisation of QSR and KFC, however, will be a long journey and will take many steps,” a source told Business Times in a phone interview yesterday.

In December 2011, JCorp and London-based CVC Capital Partners Asia III, via Massive Equity Sdn Bhd, announced their intention to buy QSR shares at RM6.80 each and RM3.79 per warrant. They also offered RM4 per KFC share and RM1 per warrant.

The source said with the latest developments, JCorp together with its partners are at arm’s length with each other to take the privatisation exercise further.

“The resignation is a gesture of good corporate governance on JCorp’s part as it is the majority shareholder,” said the source.

KFC Holdings (Malaysia) Bhd is involved in the fast food and other related businesses, which include poultry processing and distribution, commissary and bakery.

The US Kentucky-based Yum! Brands Inc is the licensor and owner of the KFC and Pizza Hut brand names.

The privatisation had run into some delays due to concerns by Yum!Brands that the exercise would stunt revenue and profit growth.

However, at a media briefing recently, Kamaruzzaman said Yum! Brands is happy with the privatisation plan. “They understand our proposal and are assured of further growth in the business. In fact, Yum! Brands sees this region as one of their most profitable,” he was quoted as saying.