IOI investors to gain from unit's lower entry price

This is written by my colleague Lim Cian Yai.

KUALA LUMPUR: IOI CORP Bhd shareholders are poised to benefit from lower entry price in its property division, which will be relisted under a new listing company (ListCo) by year-end.

Analysts said the ListCo is well positioned for steady earnings growth underpinned by booming property sales in the Klang Valley, Johor, Singapore and China.

They pointed out that IOI Corp shareholders may gain more than RM1.49 per share from the ListCo listing.

With the ListCo's indicative issue price to be at least RM4.46, each IOI Corp shareholder will pay 30 per cent less of the price, or a discount of RM1.49.

"The gain will be greater if the actual listing price turns out to be higher than RM4.46," said JF Apex Securities, which has upgraded IOI Corp from "hold" to "buy" with a target price of RM6.57.

The ListCo is set to be listed on Bursa Malaysia's Main Market via distribution in specie of about 2.16 billion shares (one ListCo share for three IOI Corp shares held) and non-renounceable restricted offer for sale of 1.08 billion ListCo shares (one ListCo share for six IOI Corp shares held) to IOI Corp shareholders.

Public Investment Bank believes the ListCo's valuation will not come cheap based on several factors including its strong earnings growth for the next three years and market value of appraised properties at RM18 billion.

The ListCo also has one of the industry's highest operating profit margin of 50 per cent and international exposure across Malaysia, Singapore and China.

Kenanga Research analyst Alan Lim Seong Chun has a "neutral" view on the relisting plan. "The positive side of the deal is the unlocking of the value of IOI Corp's property division and a higher rerating of its plantation business."

The bad aspect is that IOI Corp's earnings are expected to plunge by about 28 per cent in 2014 due to the absence of property contribution.

"Due to lower crude palm oil (CPO) prices, IOI Corp's financial year 2014 core earnings will slide 17 per cent to RM1.5 billion. Besides, its net gearing will also soar to 0.5 times from the current 0.3 times as equity portion decreases," Lim told Business Times yesterday.

He said IOI Corp may therefore need to expand plantation lands to offset the potential significant losses. 

IOI Corp executive chairman Tan Sri Lee Shin Cheng, however, maintained on Tuesday that its joint venture with Indonesian plantation companies will help sustain its performance in the absence of property business.

"Our yields are improving, our trees are also matured and surely our profit will go up. Hopefully, this can cover potential losses from property," he said.

On Bursa Malaysia yesterday, IOI Corp was the third top loser, easing 3.3 per cent, or 18 sen, to close at RM5.28.

IOI's Lee set to be nation's 3rd richest

This is written by my colleague Lim Cian Yai.


PUTRAJAYA: MALAYSIA'S sixth richest man, Tan Sri Lee Shin Cheng will be the biggest winner upon the relisting of IOI Corp Bhd's unit, IOI Properties Bhd.

With a stake of 45.77 per cent, Lee is currently the single largest shareholder in the plantation and property conglomerate IOI Corp.

From a wealth creation perspective, the deal will generate billions of ringgit for Lee and his family.

According to Forbes magazine, Lee has a net worth of US$4.5 billion (RM13.4 billion) as of March 2013. 

Based on the current RM18.6 billion market value of IOI Properties, it could bring in an additional RM8.55 billion (about US$2.85 billion) for Lee, bringing his net worth to about US$7.36 billion.

Likewise, Lee will also surpass Tan Sri Lim Kok Thay of Genting Group (net worth of US$6.6 billion) and emerge as the third richest person in Malaysia.

IOI Corp privatised IOI Properties in 2009 in a deal valued at RM1.3 billion. Upon the relisting, the property unit's asset value will balloon to RM14.6 million, a huge jump of 1,076 per cent.

"We privatised IOI Properties in 2009. At that time, the price was too low and that's why we privatised it. And now that it has matured, we are going to demerge and relist it." 

Lee disagreed that the privatisation and relisting are tricks of tycoons to make personal gains. "This is not true at all. We are relisting to enhance the value for shareholders. I am working very hard for the shareholders, not for myself."

Upon the relisting exercise, Lee will control 46.19 per cent of the shareholding in the new entity, IOI Properties Group Sdn Bhd, maintaining the company in the Lee family's tight grip.

IOI Properties' image has gradually changed since it ventured into the Singapore and China markets. From a township developer, it has transformed into a high-end condominium and commercial property developer. 

So far, its overseas projects have received encouraging response from buyers, especially the Cityscape and Jalan Lempeng projects in Singapore.

"The project in Xiamen, China, will be launched soon. Once it is launched, you can collect 100 per cent payment from the purchasers," Lee said yesterday.

While contribution from Xiamen will begin to come on stream, earnings for the next three financial years are anticipated to spike.

IOI Properties relisting by year-end

This is written by my colleague Lim Cian Yai.


PUTRAJAYA: IOI Corp Bhd will relist its property business on Bursa Malaysia under a RM12.8 billion deal by the year-end, adding to a post-election flurry of stock debuts. 

IOI Corp, the country’s fourth largest plantation company, privatised IOI Properties Bhd in 2009 in a RM1.3 billion deal, or RM2.60 per share.

“If everything goes right, the targeted relisting will be in December 2013,” said IOI Corp executive chairman Tan Sri Lee Shin Cheng at a briefing yesterday. Also present were his sons Datuk Lee Yeow Chor and Lee Yeow Seng, who are also directors in the company.

IOI Corp shares were suspended from May 9 till yesterday afternoon to facilitate the announcement of this exercise.

Once trading resumed at 2pm, IOI Corp’s shares jumped almost 7 per cent to a twoyear high of RM5.70. It gained 13 sen to close at RM5.46.

Under the relisting plan, IOI Corp will dispose of its entire 99.8 per cent stake in IOI Properties Bhd to a new entity for RM9.77 billion. This is in exchange for 2.8 billion shares in the new listing company called IOI Properties Group Sdn Bhd (ListCo).

The group will also sell other subsidiaries involved in property development to ListCo for RM2.63 billion in exchange for 589.27 million new ListCo shares.

IOI Corp will also sell 202ha of agriculture land in Rompin, Pahang, and 517ha in Segamat, Johor, to ListCo for RM276 million in return for 61.89 million new shares.

ListCo will also buy a 10 per cent stake in Property Village Bhd and another 10 per cent in Property Skyline Sdn Bhd from Summervest Sdn Bhd, which is controlled by Lee.

IOI Corp will also distribute one ListCo share for every three IOI Corp shares to eligible shareholders.

The exercise followed a proposed nonrenounceable restricted offer for sale (ROS) of 1.08 billion ListCo shares to selected shareholders on the basis of one ListCo share for every six IOI Corp shares at an offer price to be determined later.

The restricted offer of shares is expected to raise as much as RM1.8 billion to pare down the company’s borrowing.

“Barisan Nasional won in the general election, and everything is stabilising. That’s why during the last week, share prices have gone up. It’s a good sign,” Lee said. “I believe this is a good time for relisting. The property business is on a stronger footing now. We have built our landbank in strategic locations, so it is about time we unlock its value.”

Upon relisting, ListCo’s net asset value will grow from RM1.3 billion to RM14 billion, indicating more than a 10-fold leap.

Lee said the move is to streamline IOI Corp into two separate listed entities. "The relisting of IOI Properties on the Main Market will make it one of the largest listed property companies in the country," he said.

Lee reassured that he will continue to be executive chairman of the two entities, although there will be a chief executive officer for each of them.

As at January 2013, IOI Properties' market value stood at RM18.1 billion. As the underlying value of its property assets is unlocked, Lee is confident that ListCo will achieve operating profit of not less than RM1 billion per year in the coming three years.

In the year ended June 30 2012, IOI Corp's property segment registered RM704 million operating profit. "We project 50 per cent of income to come from domestic market and while another 50 per cent from overseas business," Lee added.

The property division has a total of 4,046ha here and overseas.

In the next three years, ListCo is expected to manage development projects with a total gross development value of RM16 billion.

It aims to achieve a more balanced ratio of 40:60 for property investment and development business in the coming five years. Currently, real estate investment business contributes 10 per cent to the overall property income.

Meanwhile, Lee expects palm oil prices to rebound to RM2,800 per tonne by year-end. Currently, it is trading at around RM2,300 per tonne at the Malaysian Derivatives Exchange.

"Fundamentals have been improving since last December. We have already seen the bottom and the only way is to go up," he said.

Malaysia's CPO inventory was high at 2.6 million tonnes last December. However, the stock level improved to 1.93 million tonnes as at last Friday.

Hospital that goes the extra mile

Seeing a doctor for the first time is like going on a blind date -- there's no  guarantee that even a doctor with the best credentials would be right. Sime Darby Healthcare Group tells Ooi Tee Ching that patients are increasingly requesting for clever doctors who are just as compassionate.


A JAPANESE woman was chatting nervously in her mother tongue with her school-going son when she walked into the newly-built Sime Darby Medical Centre ParkCity. 

Her eyes lit up as a staff member at the hospital counter welcomed her cheerfully in Japanese. The worry lines on her face vanished in an instant as they engaged in an animated banter. Soon after, they were bowing politely to each other. 

As she made her way to the lift, she pointed to the "breast clinic" signage on the wall to her young son and commented that the hospital places high importance on its treatment for breast cancer patients.

When told of this incident, Sime Darby Healthcare Sdn Bhd managing director Raja Azlan Shah Raja Azwa smiled and noted that there are many expatriates living in Desa ParkCity and its neighbouring enclave, Mont Kiara. 

"We see it fit to have interpreters for our clients' convenience. Among other non-traditional services we offer at our International Patients Centre are facilitation of visa-on-arrival and its extension, currency exchange, shuttle services and short-stay accommodation," he said.

"Our flagship hospital at Subang Jaya started off as a community healthcare centre catering to the needs of the people staying there. Similarly, we're doing the same with our latest addition at ParkCity," he told Business Times in an interview here recently.

Also present were Sime Darby Healthcare chief executive officer Elaine Cheong and Sime Darby Medical Centre ParkCity hospital director Ch'ng Lin Ling.

Sime Darby Medical Centre ParkCity is located at the juncture of Bandar Manjalara Kepong and Desa ParkCity. Manned by about 40 doctors and 160 nurses, it is a 300-bed hospital offering the full suite of medical and rehabilitative services, and a 24-hour emergency unit.

At Sime Darby, Raja Azlan said hospital administrators and doctors hail the adoption of an integrated electronic medical records infrastructure as it supports a patient-centric approach to healthcare. 

The ease of typing a few keywords to retrieve a patient's record as opposed to ploughing through thousands of folders, filing and refiling them saves the doctor and the hospital millions of dollars, even after taking the cost of the electronic system into account. 

He then listed down intangible benefits such as a reduction in potential medical errors, instant communication of laboratory tests and improvements in the quality of data for clinical research.

While the electronic medical record system gives easy access to patients' medical information, Raja Azlan gave the assurance that the group adheres to strict confidentiality of patients' medical records as mandated by the laws of the country, provided under the Personal Data Protection Act.

To date Sime Darby Bhd is among the top 10 listed companies on Bursa Malaysia with a market capitalisation of some RM57 billion. Apart from healthcare, the conglomerate's core businesses are in plantations, property, motors, industrial equipment, and energy and utilities.

Although the healthcare division accounts for less than one per cent of the conglomerate's earnings, Raja Azlan is hopeful of doubling earnings contribution in the mid-term.

"Hopefully, as we seek to improve our margins by leveraging the expertise of our partner Ramsay, our earnings contribution could grow to two to three per cent of Sime Darby's earnings," he says.

Sime Darby and Australia's largest private hospital operator Ramsay Health Care Ltd are joining hands to expand their healthcare businesses in Southeast Asia.

Sime Darby is combining its entire healthcare assets with Ramsay's three hospitals in Indonesia, under a new joint venture company to be known as Ramsay Sime Darby Healthcare. Under this deal, Sime will receive RM390 million for transferring 25.7 per cent of the joint venture company to Ramsay's subsidiary to allow both parties to own equal stakes in the merged entity.

Raja Azlan noted that the group will leverage on Ramsay's clinical expertise and global procurement programme to manage costs and improve margins. 

Moving on to the importance of nurturing close working rapport between hospital administrators and doctors, Cheong upheld the importance of a consultative approach that usually leads to joint decisions. "We practise an inclusive culture that is built on trust and mutual respect."

She went on to explain that loyalty to Sime Darby Healthcare is driven by the patient's sense that the hospital and its physicians are united in ensuring their medical needs are met.

A doctor who goes the extra mile usually demonstrates empathy and is at ease with patients while involving them in health decisions. On the flip side, poor bedside manners reflect aloofness, curt replies, inadequate listening skills and a somewhat disregard for patients' worries and fears.

Cheong acknowledged that some doctors and nurses are not naturally engaging in their communication but this soft skill is necessary for the hospital to ensure satisfactory healthcare is given to patients in the most economical and responsible way.

"It is only reasonable for patients to be given options for the most up-to-date treatment and that their doctor knows everything about their case, and that their pain would be adequately controlled.

"The upfront time a doctor spends attentively with patients usually saves time later in the form of phone calls, questions and complaints," she said.

"For example, when a patient is dealing with a difficult diagnosis or chronic condition like cancer, a doctor or a nurse's ability to talk respectfully and perhaps more importantly, listen empathetically, is among the most valuable assets for healthcare providers like us," she said. 

Service delivery, building and sustaining patient and community loyalty, branding an unassailable market reputation - all of this boils down to good old-fashioned teamwork, she added.

In recruiting doctors at Sime Darby Medical Centre ParkCity, Ch'ng said, "We make sure they have the tools they need - the supporting services, the equipment and the personnel they need to effectively do their job."

Indeed, she is well aware of what motivates physicians to bring their time, effort and skills to the operations and efficient use of healthcare facilities.

She acknowledged that doctors are concerned about the prospects of losing autonomy, rising malpractice costs, increased paperwork, competition, regulatory requirements and tighter reimbursement.

"The ultimate achievement is creating a working environment where doctors would place their loyalty to a hospital where they would send their own families for care without hesitation," Ch'ng added.

Bintulu Port upbeat it can deliver results

SEPANG, Selangor: BINTULU Port Holdings Bhd, which has largely been dependent on handling liquefied natural gas (LNG), is optimistic of doing better this year as it expects more robust palm oil exports from its clients in the plantation sector and increased containerised and dry bulk cargo.

"There has been a 10 per cent increase in container throughput in the first quarter of the year," said chief executive officer Datuk Mior Ahmad Baiti.

"We are hopeful of topping 45 million tonnes in total throughput by the end of the year. This is about 10 per cent more than last year's 41.2 million tonnes," he said after the company's shareholders' meeting here yesterday.

Last year, Bintulu Port reaped RM146.39 million in net profit on the back of a RM527.85 million revenue. Its major customer, Malaysia LNG Sdn Bhd, contributed 23.53 million tonnes of LNG exports, more than half of the total throughput tonnage.

Mior noted that Bintulu Port's income will be less reliant on LNG as the palm oil cargo has started to expand rapidly in recent years, with encouraging growth in the container and dry bulk sectors, too.

"The amount of palm oil exports has expanded so much that it has overtaken that of container handling. This year, we expect an additional five per cent in crude palm oil shipment to 3.1 million tonnes," he said.

Also present was chairman Tan Sri Dr Wan Abdul Aziz Wan Abdullah.

Bintulu Port's major shareholders are Sarawak State Financial Secretary Inc, Petronas and Kumpulan Wang Persaraan. 

It was reported that Bintulu Port was raising RM950 million from sukuk issuance to fund the new Samalaju Port, located 60km away to serve industries in the Sarawak Corridor of Renewable Energy (Score).

Bintulu Port will operate the Samalaju Port through wholly-owned subsidiary Samalaju Industrial Port Sdn Bhd, following Samalaju Port Authority awarding it a 40-year concession.

"The construction of Samalaju Port's interim facilities to cater for barges is currently under way," Mior said.

He added that two months ago, Bintulu Port had awarded a RM437 million job to Integrated Marine Works Sdn Bhd to carry out dredging and reclamation works. Under the package, the contractor will dredge a 5km access channel to deeper waters of 15m. 

Mior said contract for the proposed breakwater package will soon be dished out while the wharf package will be called in June. 

The other packages concerning land site infrastructure development and conveyor belt system would likely be awarded towards the end of this year.

The RM1.8 billion Samalaju Port, which is slated to complete by mid-2016, is designed to handle 18 million tonnes of cargo per annum compared with Bintulu Port's current capacity of 17.63 million tonnes (of non-LNG cargo) per annum. 

Samalaju Port's capacity can be raised to 30 million tonnes a year, if necessary.

Move to remain TOP brand

PETALING JAYA: SOUTHERN Lion Sdn Bhd, a 50:50 joint venture between Lam Soon (M) Bhd and Japan's Lion Corp, aims to capture half of Malaysia's detergent market by year-end from the current 47 per cent.

Its range of brands are Top, Biozip, Puteri Mas and Dobi. 

"Although Top is the leading detergent brand in Malaysia, it's important that we strengthen our position with new offerings that meet customers' needs in today's context of modern living," said Southern Lion marketing director William Khoo.

He reiterated the company's brand promise of delivering practical solutions to modern day space constraints for washing and drying clothes among high-rise dwellers, night washing and indoor drying for busy working professionals, smaller families, and the practice of energy and water saving.

In explaining Top's latest feature, Khoo said the detergent is able to help create a more healthy living condition in the bedroom.

While we cannot completely eliminate dust mites from our homes, we can significantly reduce their number. Apart from vacuuming carpeting and upholstered furniture, we can reduce allergens that accumulate in our bedsheets, pillow cases and blankets by laundering the bedding materials every week. 

"This is where Top comes in handy. Our new anti-dust mite formula is specifically formulated to remove 99.99 per cent of dust mite from our laundry," he said at the launch of the new variant here yesterday. 

Also present were Southern Lion managing director Annette Ling, senior marketing manager Carmen Foo and Japan's Lion Corp head researcher (New Technology Development), Fabric Care Research Laboratories Dr Seiichi Tobe.

"We've successfully developed an enzymatic cleaning technology that breaks down soluble allergens in mite dust so that they are easily removed during the washing process. This will help minimise the risk of allergy triggered by mite dust,” said Tobe.

Many detergent makers, in a bid to improve environmental profile, have been sourcing renewable ingredients such as palm oil. Southern Lion's range of detergent incorporates a highly biodegradable substance called methyl ester sulfonates (MES) that is produced by its sister company, Lion Eco Chemicals Sdn Bhd, in Johor. 

"Our leading brand Top uses MES in its formulation because of its high detergency at low concentrate, even in mineral water. It is a very efficient cleaning agent," Khoo said. 

In Japan, parent company Lion Corp has been incorporating MES in its Top and Biozip brands of laundry detergent since 1991.

WWF agenda punishing the poor

Alan Oxley is chairman of World Growth, a pro-development NGO that which has recently released a study assessing the impact of RSPO certification on producers of palm oil.

KUALA LUMPUR: THE Worldwide Fund for Nature (WWF) is one of the world’s wealthiest international environmental non-governmental organisations (NGOs). Its total global spending is close to US$500 million a year.

But it has blind spot, a big one. Eradication of poverty is not a priority for WWF.  

In fact, the NGO’s strategies to protect the environment hinder efforts to combat poverty. This will be clear today when the Roundtable on Sustainable Palm Oil (RSPO) meets here for an extraordinary session to insert WWF’s anti-development agenda into a revision of the RSPO standard. 

The revised standard includes onerous provisions for growers to report on greenhouse gas emissions. This is despite an acknowledgement by the RSPO that there is currently no practical or robust methodology for any such assessment. 

Growers and millers are being asked to comply with sustainability requirements that lack scientific rigour, and are costly and technically demanding.

Malaysian growers are perturbed. Smallholders in particular should be concerned. The revised standard includes several new criteria that will increase costs for growers, without assuring improved environmental outputs on the farm. 

The RSPO system is already too expensive and technically difficult for the majority of oil palm growers who manage small-scale plantations. There is little evidence that certification under RSPO adds value for growers who are required to meet expensive certification costs.

The system effectively prices palm oil producers out of the global oilseed and vegetable oil markets.

That appears to be WWF’s intention. Restricting the viability of Malaysian oil palm growers has a detrimental impact on the hundreds of thousands of households whose livelihood relies on palm oil production, as well as rural communities who have seen significant development as a result of increasing investment and infrastructure. This is the WWF blind spot. 

Instead, WWF focuses most of its resources on demonising palm oil through a global campaign. It contends that unless producers follow WWF’s rules for cultivating oil palm, forests and habitats for wildlife will be destroyed. 

There is no scientific justification for this claim. Forest land has been converted to oil palm plantations but the United Nations points out that worldwide, poverty is a primary driver of deforestation, as people clear land for housing, subsistence farming and fuel wood. 

Subsistence farming, gathering of fuel wood and unplanned urbanisation drive most global deforestation. Eradicating poverty is the solution to excessive deforestation, not limiting production of palm oil.

The campaign also jeopardises smallholders income, thus their ability to put food on the table for their families. Palm oil is a high-quality and low-cost vegetable oil, widely used in Malaysia, Indonesia, China, India and Africa. 

Development agencies, such as the World Bank, rate oil palm as one of the most effective crops for raising living standards and promoted the industry in Southeast Asia as a poverty-reducing crop. Smallholders prosper when producing oil palm.

The WWF system raises costs and decreases the viability of small producers. It is also not working for big business. 

In order to comply with RSPO requirements, large-scale growers must invest heavily in consultants, auditors and expensive management systems. Manufacturers, like Unilever, have to meet high cost of using more expensive WWF-approved palm oil and segregating supply chains. 

Yet, there is little commercial benefit or return on investment. There is no demand among consumers for RSPO-certified products as a recent poll in Britain concluded. 

Businesses went along with the RSPO model, thinking it would be profitable. It wasn’t. Only about 10 per cent to 15 per cent of palm oil produced worldwide is certified under the RSPO system, while only half of that is purchased.  

Consumers in developing markets are only interested in low-cost, affordable palm oil. And in wealthy Western markets, consumers won’t pay a premium for the more expensive certified oil. Yet, WWF presses on, oblivious to the failing market demand for certified product and dire economic consequences for Malaysian farmers. 

Clearly, WWF does not care. Its global policy is to prevent any conversion of forested land to other purposes, including farming, regardless of forests set aside for conservation. This further punishes the poor. 

World Growth advocates that agricultural production must increase in order to meet global demand for food.

Oil palm growers slam bias e-voting

PETALING JAYA: OIL palm growers are unhappy with the Roundtable on Sustainable Palm Oil's (RSPO) move to implement electronic voting.

Currently, voting is done via manual balloting or show of hands.

The RSPO, which was formed in 2004, is seen as being lopsided against the growers, who come mainly from Asia. The other stakeholders are based in Europe.

On paper, the growers have four executive board positions from the 12 seats available. However, the other stakeholders, namely the food manufactures and non-governmental organisations, seem to have formed a cartel of their own within the RSPO.

"Already, growers are not adequately represented in RSPO's decision-making process. So, it is only natural to question the proposal to vote electronically on lopsided proposals that seek to further burden oil palm growers," said Malaysian Palm Oil Council chief executive officer Tan Sri Yusof Basiron.

"This clear case of biasness in RSPO will lead to undemocratic outcome that is not reflective of the voice of oil palm growers. As the sowing of seeds of discontent worsens, it can and will lead to more sorry state of affairs and eventually... its downfall," he told Business Times in an interview.

On April 25, the RSPO will vote on proposals on minimising greenhouse gas (GHG) emissions from new plantings, implementing policies countering corruption, adopting human rights policy and banning the use of forced labour.

"While these proposals seem to imply stricter rules for altruistic intent, they are basically aimed at raising growers' production cost at the discretion of RSPO's decision makers and, thus, making palm oil exports uncompetitive," he said.

It was reported that RSPO executive board president Jan Kees Vis said the revised criteria, indicators, and guidance will enhance the effectiveness and relevance of the Principles and Criteria, and help address the sustainability challenges facing oil palm cultivation.

In response, Yusof reiterated that oil palm planters do not agree to changes to the existing eight Principles and 39 Criteria.

In a separate telephone interview from Kuching, Sarawak Oil Palm Plantation Owners' Association (SOPPOA) secretary Philip Ho concurred with MPOC.

"Lopsided decision-makings within RSPO is certainly not a yardstick for any organisation to be viewed as balanced in its presentation of views and opinions," he said.

Ho cited RSPO's proposal to impose GHG emission measurement for certification as akin to putting additional and unnecessary burden on oil palm growers when such demands are not imposed on other vegetable oil crops like rapeseed and sunflower.

"How come large cattle and sheep rearing activities, which cause tremendous GHG emissions into the atmosphere, are not subjected to these demands?," he asked.

Indeed, worldwide areas planted under rapeseed, sunflower and corn far outnumber oil palm but these crops are not subjected to GHG emission checks for certification.

"Where is the justice and fairness in such a scenario? Why are oil palm growers singled out while other oil crop farmers in the developed world are not subjected to these same demands? Why are oil palm growers having to face double standards?" Ho questioned. 

He went on to say SOPPOA members have always fully upheld Malaysia's laws and stringent measures that are being implemented in the palm oil industry. "We do not agree to RSPO's imposition of unreasonable and unjustifiable standards," he said.

Al-Hadharah REIT keen to top up assets

KUALA LUMPUR: AL-HADHARAH Boustead REIT is keen to buy income-generating plantation estates to top up its asset base, chairman Tan Sri Lodin Wok Kamaruddin said.

Currently, Al-Hadharah REIT has 12 oil palm plantations and three palm oil mills with a combined area of around 20,000ha.

Boustead Holdings, the parent of Al-Hadharah Boustead REIT, has an agriculture landbank of 81,333ha. To-date, more than 80 per cent of the landbank has been planted with oil palms.

Lodin, who is also Boustead deputy chairman and group managing director, expects crude palm oil (CPO) prices to rise to RM2,600 per tonne.

For the past seven months, CPO prices on the Bursa Malaysia Derivatives Exchange had been fluctuating between RM2,200 and RM2,500 a tonne.

"Since the start of the year, the CPO inventory level has started to come down from a record of 2.6 million tonnes to 2.14 million tonnes at end-March. If this trend continues, we can expect to see it coming down further to about 1.8 million.

"This, coupled with strong demand ahead of Ramadan month from Islamic nations and south Asian countries like India, Pakistan and Bangladesh, will be a boost to palm oil prices. As global demand starts to pick up and production comes down a little, we can expect palm oil prices to rise to about RM2,600 per tonne," Lodin said.

While 19,945ha of Boustead's 68,375ha planted area is injected into the Al-Hadharah REIT, he said, it is open to asset inclusion from other estate owners.

"We are open to acquire new assets to top up the REIT. It does not always have to be injected from Boustead. If there are any other estates that are profitable and interested to be part of the REIT, we are open to discussions. We prefer them to be in the right location and, of course, at the right price," Lodin said after Al-Hadharah REIT's inaugural annual general meeting here yesterday.

Also present were Al-Hadharah REIT chief executive officer Fahmy Ismail and executive director Daniel Ebinesan.

In raising yield at the Al-Hadharah REIT estates, Lodin said Boustead's plantation team will continue its replanting programme to replace ageing trees with high-yielding hybrids and clones supplied by its associate, Applied Agricultural Resources Sdn Bhd (AAR).

AAR, an equal joint venture between Boustead Plantations Bhd and Kuala Lumpur Kepong Bhd (KLK), had been breeding hybrids for the past 25 years.

"Our high-yielding hybrid seeds are meticulously bred and cloned by AAR scientists," Lodin said, adding the hybrids have proven track records of producing more than 35 tonnes of fresh fruit bunches with 23 per cent oil extraction rate.

That works out to be about nine tonnes of oil a hectare in a year or more than two times higher than the country's average yield.

"AAR's role has helped sow the seeds for good and stable dividends for the REIT unitholders every year since 2008," he added.

In the long run, Lodin noted AAR's palm breeding plan is to produce elite planting materials using marker assisted genome-wide selected palms. This, he said, will lead to a speedier and more precise prediction of superior parents for seed production.

Boustead: RM9b combat ship deal to buoy earnings

PETALING JAYA: Boustead Holdings Bhd is hopeful of doing better this year as its shipbuilding unit steps up implementation of the RM9 billion job to build six littoral combat ships for the Defence Ministry.

"We hope to achieve better results this year as we step up the fabrication of the littoral combat ships," said Boustead Holdings deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin.

Out of its six core businesses, oil palm planting is the biggest earnings contributor, followed by shipbuilding and property development. 

Last year, Boustead's earnings shrunk as palm oil prices fell. In the last six months, the third month benchmark palm oil futures on the Malaysian Derivatives Exchanges had been trading at low levels of between RM2,200 and RM2,500 per tonne.

The government had proposed the setting up of a consortium to re-ignite the country's dying biodiesel sector by trimming national stockpile and supporting palm oil prices.

Named Biodiesel Malaysia Sdn Bhd, the consortium is 30 per cent-owned by Felda Global Ventures Holdings Bhd while Sime Darby Bhd will hold 20 per cent. The remaining 50 per cent is reserved for industry stakeholders, including plantation companies, biodiesel players and oil companies.

Asked if Boustead's fuel retailing arm, Boustead Petroleum Marketing Sdn Bhd, is keen to take up a stake in Biodiesel Malaysia, Lodin said: "If the biodiesel distribution venture can bring in good returns, why not? We'll need to assess the details".

Last year, Malaysia produced about 130,000 tonnes of palm-based biodiesel, of which 100,000 tonnes were for domestic consumption and only 30,000 tonnes exported.

Lodin was speaking to reporters after the group's shareholders meeting held here yesterday. Also present were chairman Jen. (B) Tan Sri Ghazali Che Mat, director Datuk Ghazali Mohd Ali, group finance director Daniel Ebinesan, heads of business divisions Laksamana Madya Tan Sri Ahmad Ramli Mohd Nor, Chow Kok Choy, Datuk Koo Hock Fee and Tan Kim Thiam.

To another query if Boustead's banking arm, Affin Holdings Bhd, is still keen to acquire Hwang-DBS (M) Bhd, Lodin said the group had submitted its request to Bank Negara Malaysia to start negotiations.

"Hwang-DBS operations are complementary to that of Affin. We're hopeful that we stand a good chance to be chosen as acquirer. We're awaiting the central bank's approval," he said.

Affin's major shareholders are the Armed Forces Pension Fund or Lembaga Tabung Angkatan Tentera (LTAT) (35.2 per cent), The Bank of East Asia Ltd (23.5 per cent) and Boustead Holdings Bhd (20.7 per cent). The Employees Provident Fund owns some seven per cent of the group.

On property development, Lodin maintained that Boustead's RM160 million purchase of a 200-acre plot in Bukit Raja, Klang, is not a political bailout. 

"It was a commercial decision and it worked out to be RM18.40 per sq ft, a fair price for our shareholders. We had actually set our sights on that land since 2005 as it is located next to our existing 700-acre plot. We're looking to reap economies of scale in developing this 900-acre plot in the near future," he said. 

Asked if LTAT, which owns 61.8 per cent of Boustead, may want to loosen its grip on its flagship investment arm, Lodin, who is also LTAT chief executive officer, said: "It is good to have liquidity. LTAT will do so at the right time and right price and make some capital gains along the way".

Sabah RE producers set to enjoy FiT rates soon

KUALA LUMPUR: RENEWABLE energy (RE) producers in Sabah, mostly biomass and biogas plant operators at palm oil mills, may soon be able to subscribe to the feed-in tariff (FiT).

Unlike in Peninsular Malaysia, RE producers in Sabah have not been able to enjoy the deserving rate of 32 sen per kilowatt per hour (kWh) under the FiT. They, instead, have to contend with Tenaga Nasional Bhd (TNB)'s Small Renewable Energy Projects rate of 21 sen per kWh.

This is because under the law, RE producers in Sabah will only be eligible for FiT when the one per cent RE levy is collected by Sabah Electricity Sdn Bhd, a 70 per cent subsidiary of TNB, from heavy power users in Sabah.

FiT essentially guarantees RE producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal. Power generated from sustainable sources that benefits from FiT includes that of oil palm biomass, biogas, small hydro power and solar.

Since December 2011, heavy power users in Peninsular Malaysia using more than 350kWh or whose monthly bills exceed RM77, have been paying the one per cent RE levy to TNB.

The Sabah government, however, had appealed against collection of RE levy, saying it would be too taxing on heavy power users there.

Now that it has been over a year, the federal government indicated that the Sabah government seemed to have come around.

When met yesterday, Energy, Green Technology and Water Ministry secretary general Datuk Loo Took Gee said "the Sabah government has verbally agreed. We met up this week."

She was speaking to reporters after representing Energy, Green Technology and Water Minister Datuk Seri Peter Chin in officiating at the launch of the Eco-B workshop organised by Malaysia Green Building Confederation.

Asked when Sabah Chief Minister Datuk Seri Musa Aman will sign on and allow TNB to collect RE levy from heavy power users in Sabah, Loo replied: "We'll have to wait for the official letter from the Sabah state government".

Wage rule has small impact on money outflow

KUALA LUMPUR: There has not been any substantial spike in foreign workers' remittance to their home countries resulting from the implementation of minimum wages at the start of this year, said Bank Negara Malaysia (BNM).

"There's not much impact on monetary outflow despite a 20 to 25 per cent jump in their salaries," said BNM's assistant governor Dr Sukhdave Singh. He was responding to a question if Malaysia had experienced an outflow of more than RM2 billion following the blanket implementation of minimum wage law. 

Previously, Malaysia Employers Federation (MEF) executive director Shamsuddin Bardan estimated that foreign workers, on average, send back some RM700 each month, which is half of their take-home pay that include overtime claims. 

"With a conservative estimate of two million foreign workers here, that works out to be RM1.4 billion flowing out of Malaysia to their home countries every month. Starting 2013, with the blanket implementation of the minimum wage law, the outflow of money from Malaysia is likely to swell to RM2.1 billion every month," Bardan reportedly said. 

Sukhdave says one need to look at this comprehensively. Minimum wages are good for the economy and it ensures Malaysia achieves its high-income nation goal," he said, adding that a blanket wage floor eliminates the price advantage that foreign workers have over Malaysians, thus creating greater job opportunities for locals.

"Small and medium enterprises and the plantation sectors say it erodes our competitiveness. If these sectors' competitiveness is based on low wages, then that's the wrong economic structure," he said.

"The main objective of minimum wages is for low-income earners to be able to afford their basic living needs here," he added.

The Minimum Wages Order 2012, which took effect from January 1 2013, requires employers with six employees and above to pay a minimum wage of RM900 a month in the peninsula or RM800 a month in Sabah, Sarawak and the Federal Territory of Labuan.

Sukhdave was speaking to reporters after presenting his views on the country's economic performance at a seminar organised by the Malaysian Economic Association here yesterday.

When asked to comment on Goods and Services Tax (GST) and government subsidy reduction, he said this tax can be implemented in a manner with no significant loss to low-income earners' welfare. 

"As far as the government is concerned, many daily necessities like food products would actually be exempted from GST.

"As for subsidy rationalisation, you can physically transfer it directly to the lower income group. It would also significantly help offset any negative impacts of the subsidy rationalisation on the lower income households," he said.

On the Economic Transformation Programme, Sukhdave said it has played a catalytic role in promoting private investment to the country's economy.

RM342m gain for FGV from stake sale

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) has raked in more than RM342 million one-off gain, outpacing what the giant planter makes in a quarter, from the sale of its 20 per cent stake in Tradewinds (M) Bhd to billionaire Tan Sri Syed Mokthar Albukhary.

The RM342 million is larger than the RM179.6 million net profit FGV made in the fourth quarter ended December alone, which had been dragged by lower crude palm oil (CPO) prices.

In its filing to Bursa Malaysia yesterday, Tradewinds said it had completed its purchase of 59.2 million shares from FGV at RM9.30 a piece worth a total of RM550.5 million.

FGV acquired the 20 per cent stake in 2010 from Grenfell Holdings Sdn Bhd at RM3.50 a share, totalling RM208 million cash.

With the completion of the deal, FGV has made a net gain of RM342 million or a return on investment of 264 per cent.

Grenfell is a company linked to the PPB Group Bhd, controlled by Malaysia's richest man Robert Kuok.

FGV president and chief executive officer Datuk Sabri Ahmad could not be reached for comments, but last December said that proceeds from the sale will be used in its upstream sector - to buy more plantation land for rubber and oil palm in countries such as Myanmar, Cambodia and Indonesia.

"With proceeds of RM342 million, FGV can buy controlling stakes in many other companies," said an analyst who declined to be named.

Syed Mokhtar announced last December his plan to take Tradewinds private, of which, sources said, will be restructured into four separate divisions - rubber, sugar, oil palm and rice.

The plan is expected to lead to the privatisation of both Tradewinds Plantation Bhd and the country's sole rice importer Padiberas Nasional Bhd (Bernas).

The low-profile businessman and Malaysia's seventh richest was taking over Tradewinds by offering shareholders RM9.30 for every share he did not already own in the company.

The vehicle for the deal is his private companies - Perspective Land Sdn Bhd, Kelana Ventures Sdn Bhd, Seaport Terminal (Johor) Sdn Bhd and Acara Kreatif Sdn Bhd - which would acquire all the shares they did not already own in Tradewinds by cash.

The whole privatisation deal is expected to cost RM2.5 billion.

Prior to the purchase of the 20 per cent stake, Syed Mokhtar directly and indirectly owned 42.97 per cent of Tradewinds, which in turn, had 69.76 per cent and 72.57 per cent control of Tradewinds Plantation and Bernas, respectively.

It was also reported that from January 2010 to date, FGV has received net dividends totalling RM46.3 million from the Tradewinds stake.

FGV is one of the world's largest plantation company, owning over 850,000ha land in Malaysia, 500,000ha of which it leases and manages for the country's 112,635 smallholders.

The plantation conglomerate, which produces over three million tonnes or 10 per cent of the world's CPO output, is already flushed with RM4.4 billion cash, raised from its initial public offering in June last year.

'Explain to foreign workers about minimum wages'

KUALA LUMPUR: The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) is urging all relevant authorities and agencies to explain to representatives of foreign workers on the latest changes to minimum wages.

In a statement yesterday, the trade body said this is to avoid any misunderstanding by the foreign workers and recurrence of riots in Muar.

Three days ago, Muar police foiled an attempt by 5,000 foreign workers from Nepal to hold a demonstration there. Muar police chief Assistant Commisioner Mohd Nasir Ramli said his men prevented them from gathering in front of a supermarket in Jalan Ali. 

"We detained 106 people, including those believed to be the masterminds behind the gathering, for questioning and they were released at 1pm," he had said. Last week, Muar police also arrested 32 Nepalese workers for rioting at a furniture factory over their salaries.

In view of these unfortunate incidents, the National Wages Consultative Council (NWCC) had two days ago, announced that small and medium enterprises (SMEs) are allowed to defer implementation of minimum wages for their foreign workers until the end of this year.

Employers of other sectors who are facing difficulties in implementing minimum wages may also appeal for deferment by submitting their applications to NWCC in Putrajaya by June 30 2013.

Following NWCC's decision, employers in the SME sector are not allowed to make deductions from the foreign workers' wages for the levy, cost of accommodation or other allowances.

Instead, they will be given more time to negotiate with their employees on ways to restructure their salary framework. 

As for employers of big companies who have been implementing minimum wages for foreign workers from January 1, NWCC said they will be given blanket approval for deductions of levy and cost of accommodation.

NWCC said the amount of levy to be deducted is pro-rated monthly and it shall not exceed RM50 a month for each foreign worker. Both the deductions must be reported to the Labour Department.

However, under special circumstances and based on individual merits, the Labour Department may consider applications for cost of accommodation exceeding RM50 a month for each foreign worker, NWCC said.

The Minimum Wages Order 2012, which took effect from January 1 2013, requires employers with six employees and above to pay a minimum wage of RM900 a month in the peninsula or RM800 a month in Sabah, Sarawak and the Federal Territory of Labuan.

Mobile hospital set up at Felda Sahabat

KUALA LUMPUR: The Health Ministry will set up a 40-bed "mobile hospital" to provide medical treatment for the people and security forces personnel at Felda Sahabat in Lahad Datu, Sabah.

Its minister, Datuk Seri Liow Tiong Lai, said the mobile hospital would benefit those in the remote area as many of the injured or sick patients had to travel more than 100km to reach the nearest hospital.

The Lahad Datu health centre, nearer to Felda Sahabat, only provides outpatient treatment without warding patients.

The mobile hospital, which will be built beside the Lahad Datu health centre, will bolster treatments currently provided at a 12-bed mobile tent set up there.

Six groups comprising 44 medical personnel, specialists, pediatricians and psychiatrists from here will be deployed there.

Liow said safety would not be an issue as the mobile hospital would be located 6km away from the conflict zones and guarded around the clock by security forces.

He added that the ministry was monitoring the hygiene and sanitation levels at relief centres for displaced villagers to prevent any disease outbreak. Liow said vaccinations would be carried out to those at the relief centres.

It was previously reported that the ministry had allocated RM4 million to provide free medical treatment to those in the terrorist-hit areas of Sabah, including the security forces.

'Palm oil shipments unaffected'

PETALING JAYA: PALM oil exporters from Lahad Datu, Sabah, did not experience any shipment cancellation despite the intrusion by Sulu terrorists.

Since the government launched Ops Daulat offensive on March 5 to counter the terrorist threat, 56 Sulu gunmen had been killed while 10 security forces personnel died in the line of duty.

"No, there had been no force majeure invoked with regards to palm oil shipment from Lahad Datu," said Palm Oil Refiners Association (Poram) chief executive officer Mohammad Jaaffar Ahmad. 

He was responding to rumours of palm oil shipment cancellation in the midst of unrest in Lahad Datu.

In the frenzy of the Ops Daulat offensive launched last week, a news report stated that the government had ordered Kuala Lumpur Kepong Bhd (KLK) and other palm oil refineries in Lahad Datu to halt operations for a few days. 

Soon after, another news report quoted a KLK official as stating the group's estates and refinery operations were running as normal.

"We are monitoring the situation and will act accordingly," the company official said.

Confusion arising from the first few days of fighting in Lahad Datu clouded price-sensitive information flow to many participants at the Palm and Lauric Oils Conference & Exhibition Price Outlook in Kuala Lumpur early last week.

When commenting on conflicting news reports concerning Poram members, Jaaffar noted that traders leveraged on volatile palm oil price swings in the futures market.

According to Malaysian Palm Oil Board, there are 13 refineries in Sabah with a total capacity of 7.73 million tonnes per year. 

In Lahad Datu, there are five refineries under Felda Group, Wilmar International Ltd, KLK and Kwantas Bhd. These refineries get their palm oil supply from surrounding mills under Felda, Hap Seng Plantations, KLK, Sime Darby Bhd, Wilmar and IOI Corp Bhd, including independent mills.

In an interview with Business Times here yesterday, Jaaffar confirmed that Lahad Datu port was never closed to traffic despite the ongoing Ops Daulat offensive. 

"Based on the feedback we received from our members, shipping activities in Lahad Datu are as per scheduled. 

"There is no threat of 'force majeure' clause being invoked arbitrarily. Refiners are transporting their refined palm oil products to the port for shipment without any disruption," he added.

Jaaffar explained that the force majeure clause in a contract excuses a party from not performing its contractual obligations due to unforeseen events beyond its control. These include floods, earthquakes and other "acts of God" as well as terrorist attacks. 

When asked on exports outlook, Jaaffar expects Malaysia's palm oil stocks to continue its downtrend. 

"We are bullish on palm oil exports as they will pick up when the winter season is over in the Western hemisphere. In the mid term, we see consumers from China and India coming back into the market to replenish their stocks," he said.