Archive for November 2011

Palm tocotrienols under scope

Malaysia started testing the benefits of palm oil vitamin E on humans, as early as 11 years ago. As the medical fraternity finds more evidence of this potent antioxidant having life-saving attributes, the Malaysian government decided to pump more money into such trials. OOI TEE CHING interviews the lead researchers.

HERE'S an interesting fact about vitamin E. It comes from palm oil and its Western counterparts namely soya, canola and sunflower.

But it is the ones that come from soyaoil and canola, known as tocopherols, that are the most commonly available form of vitamin E in the market. The other half of the vitamin E family is tocotrienols that come from palm oil and they are now beginning to gain recognition as the superior sibling.

Medical evidence shows that tocotrienols possess unique biological characteristics that protect body cells from damage and death. More importantly, early evidence shows that they may possess the warrior-like ability to zealously hunt down and kill cancerous cells.

It is this life-saving prospects from degenerative diseases that prompted the Malaysian government to boost funding for palm oil vitamin E clinical trials.

Performance Management & Delivery Unit's (Pemandu) director of palm oil National Key Economic Area (NKEA) John Low said palm oil is rich in tocotrienols, with up to 800mg in one kilogramme. 

"This makes palm tocotrienols ideal for medical research. We're allocating RM20 million to test the benefits of this super vitamin E on humans," said the senior executive from the Prime Minister's Department.

Low was speaking to Business Times on the sidelines of the RM20 million grant award ceremony officiated by the Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

The clinical trials, to be carried out in Malaysia, the US and Australia, will determine the effects of tocotrienols on adults facing high risks of stroke, cancer, diabetes and children suffering from attention deficit hyperactive disorder (ADHD).

One of the grant recipients is Chandan Sen, who is professor of surgery at the Ohio State University Medical Center.

For the first time in the US, Sen and his team will embark on human trials after having studied stroke prevention effects of tocotrienols, using animal and cellular models in the last 13 years. So far, the studies have shown that tocotrienols help recovery from stroke by inducing growth of new brain arteries that bypass stroke-affected areas. 

Following these positive results, Sen will embark on a two-year trial, starting 2012 to study the effects of palm tocotrienols on 100 volunteers with high risk of contracting stroke.

At the recent Palm Oil International Congress (Pipoc 2011) held in Kuala Lumpur, Sen attracted a lot of attention when he said tocotrienols are the most potent of all known nutritional ingredients in protecting brain cells.

On the same note, he cautioned that smoking and vitamin E may not go well hand-in- hand. "It is this detrimental combination that we are excluding smokers from the tocotrienol clinical trial," he said.

With more than 250 publications under his name, Sen is cited more than 900 times a year in scientific literature, particularly in those related to stroke.

While he sees promising prospects in consuming tocotrienols to reduce the risk of stroke, Sen stresses that vitamin supplementation is not meant to be magic bullets that can undo a lifetime of unhealthy habits. >"When consumed properly with a balanced diet of fruits and vegetables, getting adequate exercise and not smoking, palm tocotrienols can play an important role in maintaining and promoting overall brain health," he says.

Sen's trials will source tocotrienols from Carotech Bhd, a subsidiary of Ipoh-based Hovid Bhd. Some of the volunteers under the trial will consume Carotech's self-emulsifying vitamin E softgel capsules named "Tocomin SupraBio", which are designed for optimal absorption into the body.

Another grant recipient is Dr Fong Chee Wai of Davos Life Science, Singapore. Together with Professor Y.C. Wong of Hong Kong University, they head a team of clinicians to find out if gamma-delta tocotrienols are able to prevent and delay the disease progression in men suffering from metastatic castration refractory prostate cancer (CRPC).

When a patient is diagnosed with CRPC, it is like being served a death sentence. "Current chemotherapy drugs such as Docetaxel have limited effects on prostate cancer stem cells, although they are currently the first-line drug given to patients with advanced prostate cancer," Wong says. 

But there is hope on the horizon. Animal model studies have shown that gamma-delta tocotrienols can effectively inhibit CRPC growth by targeting both ordinary cancer cells and cancer stem cells.

"With such compelling results from the animal studies, we hope to see similar effects in delaying the progression of CRPC and prolonging survival in the upcoming human trials," the professor says. 

The two-year trial will involve 50 prostate cancer patients at the Universiti Malaya Medical Centre and Kuala Lumpur General Hospital. Parallel trials at the Queensland University of Technology in Australia will also see participation of another 50 patients.

KLK's Q4 profits jump 48pc on asset sale

This is written by my colleague Rupinder Singh.

KUALA Lumpur Kepong Bhd (KLK) says its fourth-quarter net profit jumped 48 per cent, due mainly to gains from an asset sale and it has bumped up dividends. The plantation group reported a net profit of RM460.6 million for the quarter to September 30 2011, up from RM311 million in the same period last year.

It also announced a dividend of 70 sen per share for the fourth quarter, bringing the total payout for the year to 85 sen. This is better than 60 sen a share paid out in 2010.

"The current quarter's results were boosted by the non-recurring surplus of RM200.6 million arising from the disposal of an associate, Esterol Sdn Bhd, while last year's quarter had a writeback of RM76 million on the allowance for diminution in value of investment," the company told Bursa Malaysia yesterday.

The group said it would be difficult to forecast its profit for the current financial year ending September 2012, given uncertainties in the global market and the effects of the eurozone debt crisis. 

"We are, however, confident that our plantations business fundamentals remain sound based on our commitment to improve efficiencies and productivity. The group anticipates satisfactory returns for the current year," it said.

For the final quarter, KLK's plantation sector recorded a slightly lower profit of RM447.5 million from RM454.4 million in the third quarter, due to lower commodity prices.

Meanwhile, the manufacturing sector incurred a loss of RM49.3 million compared with a profit of RM95.5 million in the previous quarter due to the eurozone sovereign debt crisis and weak global macro economic environment.

Its retailing business reported a lower loss of RM2.8 million compared with a RM7.8 million loss in the previous quarter.

For the 12-month period, net profit was up 55 per cent to RM1.57 bilion with improved performance from its plantations and manufacturing divisions.

Its plantation profit jumped 42 per cent to RM1.6 billion, driven by strong selling prices of commodities which had overshadowed the impact of higher production cost, it said.

The manufacturing sector achieved a 40 per cent increase in profit to RM201.9 million despite the loss suffered in the fourth quarter. KLK said the manufacturing division had benefited from added capacities coming onstream as well as a relatively strong business environment in the earlier part of the year.

The group also attributed the improved last quarter to the sale of associates, Esterol and Barry Callebaut Malaysia Sdn Bhd, which generated a total surplus of RM244 million.

Assam Laksa for that extra kick

Swimming is fun! To go faster, I need to have stronger pulls and kick off from the wall real hard.

A friend suggested I try out kick-boxing. It turns out that Muay Thai can be very draining. But, after a while, I actually feel better. Yay! Stronger bones.

The coach, however, says I need to take in more protein to help muscle repair. I looked back at him. He rolled his eyes to the sky and said, "Assam Laksa ... it is low in fat, high in protein and has moderate amount of complex carbohydrates. Remember, eat up your vege ... cucumber and pineapple are good for you."

My thoughts wandered back to that assam laksa meal I had with Mr Tan and Mr Sim at Penang Island early this year when we attended a conference organised by Incorporated Society of Planters. Strangely, at that time, Mr Sim also reminded me to eat up my vegetables.


6 fish fillet (mackerels)
8 cups of water
5 pieces of assam keping (peeled tamarind)
Laksa noodles
Spice Paste:
15 dried red chilies
5 fresh red chilies
8 small shallots
1 inch galangal
2 tablespoons belacan (shrimp paste)
1 stalk lemon grass
Tamarind Juice:
a fistful of Tamarind paste and seeds
2 cups of water
1 teaspoon salt or to taste
2 tablespoons sugar or to taste
1 cucumber 
1 bunch of mint leaves 
1 bunch of polygonum leaves (daun kesom)
1 bunga kantan/torch ginger flower (cut into small pieces)
1 red onion
1 lettuce 
1 red chilli
1 small pineapple (cut into short strips)
Heh Ko/Prawn Paste
1. Clean the fish, remove scales and guts. Bring 8 cups of water to boil. Add in the fish and boil for 10 minutes. Transfer the cooked fish out into a bowl and let it cool. Strain the fish stock, add in the peeled tamarind and polygonum leaves. Let it simmer.
2. Separate the fish fillet and discard the bones. Put the fillet back into the stock, cover the lid and lower the heat.
3. Use a food processor to grind the spice paste. Heat up the wok and saute the spice paste in palm cooking oil for 5 minutes or until it smells aromatic. Transfer the spice paste into the boiling stock.
4. Extract the tamarind juice and add into the stock. Strain the tamarind juice and keep the seed. Repeat many times with 1/2 cup of water each time to make sure you extract all the essence from the tamarind. For seasoning, add salt and sugar to taste.
5. In a serving bowl, add in the laksa noodles and garnish with vegetables and pineapple pieces. Pour the fish broth into the bowl and serve immediately with a spoonful of Heh Ko/prawn paste.
Serves 3.

Oil palm sector on alert of bud rot disease threat

KUALA LUMPUR: Malaysia’s oil palm industry is on alert for the bud rot disease that has killed millions of trees in South America. The disease is estimated to have wiped out some 50,000ha of oil palm estates in South America, said planters from Colombia, the world’s fifth largest oil palm producer in the world. 

Although no cure has yet to be found, Malaysian planters should not panic, said Dr Ahmad Kushairi Din, Malaysian Palm Oil Board (MPOB) deputy director-general. 

“We’re taking proactive measures from prevention to control, should there be any contamination. Our stringent quarantine controls have always been in place,” he told Business Times on the sidelines of an international seminar held here last Friday.

Malaysia is the world’s second largest palm oil producer and exports from this industry is forecast to hit RM80 billion this year, its second straight record year. The country will soon be sending a team of agronomists to South America to study the disease.

Kushairi, who is also International Society For Oil Palm Breeders president, explained that the bud rot disease is caused by a microbe called phytophthora palmivora. “Based on our initial study carried out more than 10 years ago, we find that the bud rot disease can spread very quickly because this pathogen is able to swim in the water. It thrives in a very humid and cloudy environment,” he said.

MPOB has also signed a research agreement with Cenipalma, the research institute of the Colombian Palm Oil Growers Association.

Colombia, the oil palm hub in South America, has 350,000ha planted with oil palms. It is the fifth largest oil palm country in the world after Indonesia, Malaysia, Thailand and Nigeria.

Jorge Corredor, a Colombian oil palm smallholder attending the seminar, revealed the bud rot disease had wiped out all 3,200ha of his oil palm estates in just two years. 

“We tried sanitation, it didn’t work. Even the replanted Dolly Partons we sourced from Malaysia died. Until today, we have not found the cure,” he said.

Malaysia’s oil palms are affectionately called Dolly Partons by planters because the trees are short and produce very big fruit bunches compared to the original palms brought in from West Africa, a hundred years ago. In the last 50 years, our agronomists have been marrying the Dura and Psifera palms (DXP) to get the Dolly Parton hybrids that bear voluptuous fruit bunches. 

Corredor said the bud rot disease is not just in Colombia as it has spread to Panama, Suriname, Brazil and Ecuador. "So many of our mills have closed down and many people have lost their jobs. My country and your country is situated along the tropical belt of the globe, we share the same weather. I'm telling you, this bud rot disease is a serious threat."

"I have nothing to gain from talking about what has happened to the oil palm industry in my country. This is something I would not wish upon planters in other countries. This is potentially a global problem," Corredor said. He thinks that the world could face a shortage of cooking oil if the disease finds it way to Southeast Asia.

KLK eyes more plantations overseas

KUALA LUMPUR: Top 20 heavyweight Kuala Lumpur Kepong Bhd (KLK) is exploring opportunities overseas to grow its oil palm and rubber plantation landbank to 300,000 hectares from over 250,000, currently. Chief executive officer Tan Sri Lee Oi Hian said the company is looking at Africa, South America and southeast Asian countries where it has yet to set foot in. 

“Internal studies have been done. Currently, we are evaluating them,” he told a media briefing here yesterday. Lee said KLK has not set any time frame and is waiting for the right time to make further moves. 

The company has also set a target to increase its fresh fruit bunch (FFB) production by 8 to 10 per cent of the current 3.3 million tonnes, over the next two years. 

This could be achieved based on the age profiles of its existing plantations, the increase in harvested areas and improved productivity through good agricultural practices, he said. To support the growth in FFB production, Lee said, the company plans to build another palm oil mill in East Kalimantan, Indonesia, on top of the three new mills currently under construction. To date, the company has eight palm oil mills in Indonesia.

On the oleochemical division, Lee said KLK has set aside around RM700 million to build oleochemical facilities, including another fatty alcohol plant and research and development facilities, in Malaysia. These are expected to be ready in two years, he added. 

He said KLK's team of engineers and chemists are formulating a comprehensive product portfolio to take advantage of the rising global demand for oleochemicals. “Malaysia is still a small market for oleochemicals. The key users are overseas and so, it’ll be export-driven,” he said. Currently, the oleochemicals division contribute to 17 per cent of the group’s profits.

On the properties division, KLK planned to have four to five launches in the next eight months within the Sungai Buloh area, he said. --Bernama

IOI Q1 profit falls 48pc to RM258.1m

Kuala Lumpur: IOI Corp Bhd's first quarter profit ended September 30 plunged 48 per cent to RM258.10 million, despite its plantation business doing better from a year ago.

In its filing to the stock exchange yesterday, IOI explained the lower profit was due mainly to paper loss in foreign exchange contracts and borrowings amounting to RM271.7 million. It also saw lower earnings from its oleochemicals, specialty fats and property development businesses.

IOI's plantation segment profit jumped 56 per cent to RM557.1 million from RM356.4 million, thanks to 11 per cent more harvest of fresh fruit bunches at higher palm oil prices. 

Average palm oil price realised in the quarter was RM3,149 per tonne, 21 per cent more than RM2,598 per tonne recorded a year ago.

The group's oleochemical and specialty fats operations, however, saw lower profits of RM33.2 million on slower sales at lower margins. Nevertheless, the group intends to move further downstream. In the next two years, it is investing RM130 million to build a new fatty ester and specialty oleo derivative plant with a capacity of 20,000 tonnes per year, at its Prai Industrial Complex in Penang.

During the quarter, profits from property sales only amounted to RM116.6 million, 31 per cent less than RM168.2 million a year ago.

On its outlook for the current year ending June 2012, IOI said the global economic growth is showing signs of a slowdown. "Though challenging, we remain optimistic on strong plantation earnings," it added.

Apply for ISPO cert from Jan 2012

KUALA LUMPUR: Malaysian oil palm planters in Indonesia, whose estates are mandated to be certified under the Indonesia Sustainable Palm Oil (ISPO), can start applying from January 2012.

"This year, we've been busy laying down the legal mechanisms for ISPO. Next year, we'll start enforcing the ISPO," said Indonesia Palm Oil Commission chairman Rosediana Suharto. 

The ISPO reflects compliance with all existing laws of four ministries namely; Ministry of Agriculture, State Ministry for the Environment, the Minstry of Forestry and the National Land Agency.

"The ISPO is meant to streamline the enforcement channels of various government agencies," Rosediana told Business Times at the sidelines of the Palm Oil International Congress (Pipoc 2011) here yesterday. Rosediana said oil palm planters have until end-2014 to fully comply with the ISPO. 

Currently, a number of oil palm plantations in Indonesia hold certifications from the Roundtable on Sustainable Palm Oil (RSPO). Malaysian firms, of which estates are RSPO-certified, do not automatically qualify for ISPO but "they will be given due consideration and accorded flexibility".

The RSPO was initially hailed as a forum where stakeholders of diverse interests are considered as equal partners. Somehow, over the years, the roundtable of equal duties and rights became lop-sided. The RSPO has tipped in favour of environmental and animal rights activists.

Western green activists and their affiliates in Indonesia reportedly argue that "the ISPO is of lower standards than RSPO" and questioned whether it will be internationally accepted.

In response, Rosediana said, "The word 'sustainable' does not belong to any one organisation. The interpretation of the word 'sustainable' is not confined to that dictated by RSPO. We're doing this for our country. We're doing this for our environment. Unlike some organisations, we're not doing this for money. There's no membership fees and we'll ensure that the auditors comply with government regulations." 

More funds for palm oil vitamin E clinical trials

KUALA LUMPUR: The government has more than doubled funding to test the benefits of palm oil derived vitamin E on humans.

Starting next year, the government, via Malaysian Palm Oil Board, will work together with teams of doctors in Malaysia, Singapore, the US and Australia to find out the effectiveness of palm oil vitamin E in preventing degenerative diseases.

"The human trials are going to cost us RM20 million. Six principal investigators will determine the effects of tocotrienols on stroke, cancer, diabetes and children who suffer from attention deficit hyperactive disorder (ADHD)," said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

Most people think vitamin E only comes in a single form, but there are actually eight -- four tocopherols and four tocotrienols. Over the last 30 years, scientific studies have shown that tocotrienols, is a far more potent antioxidant than tocopherols.

Tocopherols are sourced from oilseeds such as soya oil, canola and sunflower, while tocotrienols are only available in high concentration in palm oil and rice bran oil.

Tocotrienols are able to help in body cell regeneration and more importantly, it can seek and kill cancerous cells. It is these unique biological activities in tocotrienols that show a promising future in finding cures for degenerative diseases like stroke and cancer.

"Although we're the biggest tocotrienol producer and exporter in the world, we need to carry out more scientific studies to gain a deeper understanding of the health benefits of this super vitamin E," Dompok said. A kilogramme of palm oil vitamin E sells for US$500 (RM1,585). Every year, Malaysia exports some RM50 million worth of palm oil health supplements, mainly to Europe, the US, Canada and Japan.

"This shortlisting of six principal investigators for these clinical trials took considerable time as we needed to be thorough and stringent. We want these trials to produce health supplements that will be approved by the US Food and Drug Administration and the European Medicines Agency," the minister told reporters in a press conference held in conjunction to Palm Oil International Congress (Pipoc 2011) here yesterday.

This funding boost for usage of tocotrienols in human trials is part of The Performance Management & Delivery Unit's (Pemandu) drive to expedite value addition of the palm oil downstream activities.

The recipients of the RM20 million fund are Professor Bharat B. Aggarwal of Anderson Cancer Centre in the US, Professor Chandan Sen of Ohio State University in the US, Dr Fong Chee Wai of Davos Life Science, Professor Yip Cheng Har of Universiti Malaya Medical Centre, Professor Yuen Kah Hay of Universiti Sains Malaysia and Dr Tan May Loong of Penang Medical College.

Palm oil exports set to hit all-time high of RM80b

KUALA LUMPUR: Malaysia's palm oil exports for this year is set to hit an all-time record of RM80 billion, thanks to higher average palm oil prices and sustained demand for the edible oil from emerging economies.

In the first 10 months, the Malaysian Palm Oil Board (MPOB) reported that the country had shipped out RM66.78 billion worth of palm oil products. "This was buoyed by crude palm oil (CPO) price averaging above RM3,000 per tonne," MPOB chairman Datuk Seri Shahrir Samad said.

The current record was achieved in 2008 when palm oil shipment topped RM65 billion. CPO price averaged at RM2,800 per tonne then. 

Malaysia's biggest palm oil client is China. During his second official visit to Malaysia in April 2011, China Premier Wen Jiabao promised Prime Minister Datuk Seri Najib Razak that his country will continue to buy big quantities of Malaysian palm oil. As the largest vegetable oil consumer in the world, China makes up 15 per cent of global palm oil consumption. Palm oil is the second most consumed there, after soyaoil.

In the last few years, Shahrir noted that China has started to import more soyabeans instead of soyaoil. This is because the Chinese government wants more crushing activities domestically and more soya meal to feed its pig, cattle, dairy and poultry farms. "Although we see this situation prevailing, we're not too worried. China has a big appetite for palm oil," he said. 

Shahrir was speaking to reporters after the opening of the Palm Oil International Congress (Pipoc 2011) by Plantation Industry and Commodities Minister Tan Sri Bernard Dompok here yesterday.

In the first 10 months of this year, China bought 3.34 million tonnes of palm oil, about 13.5 per cent more than the same period last year. 

"Also, India has bought 1.35 million tonnes, 33.6 per cent more from the same 10 months of last year," Shahrir added.

With economic activity in the US still flat-lining, Christine Lagarde, head of the International Monetary Fund, last week warned that Europe's debt crisis risked plunging the global economy into a "lost decade". Despite such gloomy global economic prospects, Dompok remains hopeful that Malaysia's commodity exports like palm oil and rubber will continue to help spur our nation's economy to expand by a further 6 per cent, as estimated by Bank Negara.

On another matter, all licensed seed producers have announced that starting 2012, they will raise the price of oil palm seeds by 30 per cent to RM2.35 each from the current RM1.85. They attributed the price hike to burgeoning labour cost. 

Since September 2011, oil palm plantation firms have been paying a minimum wage of RM650 per month to plantation workers, with an additional productivity-linked RM200 incentive. It is estimated that this 10 per cent wage hike for employees is costing the industry an additional RM300 million per year.  The arrears of wages and ex-gratia payment translate into an additional RM364 million.

On the whole, the implementation of the new wage and extra remuneration is inflating oil palm planting and palm oil production costs in Malaysia. 

The Home Ministry, too, has increased overall foreign worker levy by RM50, meaning employers in the plantation industry need to pay a higher levy of RM590 per worker.

In view of these inflationary pressures on the oil palm industry, Dompok was asked if the government is looking to raise the replanting budget for smallholders. He said: "I think, for the time-being, RM7,000 per hectare will suffice."

Early this year, the government had estimated that from 2011 to 2013, some RM3 billion would go to smallholders to replant 375,000 hectares. There are 161,000 independent smallholders in Malaysia. With 600,000 hectares, they account for 12.8 per cent of the country's planted area.

Independent smallholders with 40 hectares or less are entitled to a one-off replanting payment of RM7,000 per hectare. In addition, monthly payments of RM500, for two years, will be accorded to each household that solely depends on oil palm planting.

New heavyweight landscape on Bursa Malaysia

This is written by my editor.

Over the last 10 years, the landscape of Malaysia's biggest companies has changed significantly. Looking at the top 10 list, we now have much bigger companies. In terms of total size, the heavyweights have almost tripled their value to nearly RM450 billion.

There are other interesting observations. Investors appear to have more love for businesses like banking and there are new players like Petronas Chemicals Holdings Bhd. Here are the main features and what they probably mean.

1. THE LEADER IS NOW MAYBANK. Ten years ago, Telekom Malaysia Bhd (TM) was the most valuable company, but today it is Malayan Banking Bhd with a market value of almost RM62 billion.

It has tripled its worth over the period. Its pole position reflects a regional expansion strategy that continues paying dividends.

What is more interesting is that the former leader is out of the top 10 and is now ranked 22nd. The main reason for this is the fact that the growing mobile telecommunications business was spun off under Axiata Group Bhd, leaving TM with the fixed-line and Internet service operations. Its offspring, Axiata, is ranked sixth.

2. IT'S NOT YOU, IT'S ME. Investors are loving banks today and breaking up with utilities like TM and Tenaga Nasional Bhd (TNB). The passion for banking could be down to economic growth in Malaysia and Southeast Asia as lenders are seen as proxies to economies. The young population of Southeast Asian countries also means that more aspiring young professionals will borrow to buy cars and homes.

TM's decline has been explained above and as for TNB, it needs to have more certainty over power prices that are controlled by the government.

They may talk and sing to their oil palm trees, but if that means creating valuable businesses, investors are glad to pay for their stocks. 

IOI Corp Bhd and Sime Darby Bhd are in the top 10 today, thanks to growing demand for cooking oil and soap, among others. Erratic weather patterns mean that supply disruptions could be a regular feature, keeping palm oil prices high.

What's more as another big planter, Felda Global Ventures, will make its debut on the stock market next year and it seems unfazed by the spectre of a recession in 2012.

4. THE NEW KIDS ON THE BLOCK ARE NOT KIDS. Half of the top 10 list have changed. Gone are names like British American Tobacco and MISC and we now have companies like Axiata and Maxis. The new names are worthy heavyweights, reflecting investors' appetite for growth in mobile telecoms, petrochemicals and plantations.

While technology can be disruptive to companies like TM, it is also a boon to mobile operators with a regional footprint and vision to adapt to the changing needs of the modern consumer.

5. ENTREPRENEURS CREATE A LOT OF VALUE. There are four companies that are not government-linked in the new top 10 list compared with three some 10 years ago. What this means is that we do have world-class entrepreneurs running companies that can stack up against GLCs. They have created much value over the last 10 years.

IOI Corp for instance, has seen its market value surge a massive 15 times to RM32 billion. Gaming and power group Genting Bhd's market value is up six times to almost RM40 billion.

Ex-servicemen get fruitful return from golden crop

IJOK, Selangor: Did you know that for every oil palm seed sold by Applied Agricultural Resources Sdn Bhd (AAR), half of the profits go to soldier pensioners?

"We jointly own AAR with Kuala Lumpur Kepong Bhd (KLK). It has been 25 years and we're very happy with our marriage," said Boustead Holdings Bhd deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin.

Boustead is the flagship investment arm of the Armed Forces Pension Fund or Lembaga Tabung Angkatan Tentera (LTAT). 

"AAR is a synergistic and profitable partnership with KLK that is working well for us. We wouldn't want it any other way. The team at AAR are doing a good job," he told Business Times in an interview here.

Since 1982, Lodin has helmed LTAT. More than a decade later, when the military pension fund took control of Boustead, he was also entrusted with the same duty to reap decent returns for shareholders. 

Boustead makes an annual profit of between RM450 million and RM700 million. 

Out of its six core businesses, plantation is the biggest earnings contributor, followed by shipbuilding and property development. Boustead has a total plantation landbank of some 100,000 hectares, of which three quarters is planted with oil palms while the remainder is still greenfields.

One of the contributing factors to Boustead earning big money from oil palm planting is the supply of high-yielding hybrid seeds, meticulously bred and cloned by AAR scientists.

Malaysia is in the forefront of oil palm breeding. Through research and development, seed producers in the country are able to increase yield and improve disease resistance. Since 1986, AAR has been one of the 10 licensed seed producers in the country, contributing to the replanting of unproductive trees so as to raise the national oil palm yield.

According to Malaysian Palm Oil Board, some 45 million germinated seeds have already been planted by farmers in the first eight months of this year. Most of the replanting of old trees have been carried out in Sabah and Peninsular Malaysia while new plantings are undertaken in Sarawak.

What separates AAR from its bigger and financially stronger rivals - like Felda Agricultural Services Sdn Bhd and Sime Darby Seeds & Agricultural Services Sdn Bhd - are its super-oily fruits and smaller-sized oil palm trees that allow for high-density planting.

Lodin introduced AAR's very high oil yielding semi-clonal hybrid called "AA Hybrida 1S". Compared with the industry standard, the dwarf-like AA Hybrida 1S has more, albeit smaller, fruit bunches.

"One of the problems of big bunches is that the inner fruitlets do not have space to develop fully. In smaller bunches, however, the inner fruitlets have a greater chance to develop and ripen more evenly. Therefore, for the same weight, smaller bunches yield more oil," he said, adding that the AA Hybrida 1S is 'the cream of the cream' and can yield 20 per cent more oil than the previous generation of oil palm hybrids.

AAR scientists are able to produce such good results because they adopt the semi-clonal strategy to step up seed production while maintaining key qualities like the dwarf stature of the tree and high oil yield in the fruit bunches. 

At the tissue culture laboratory, these scientists carry out cloning where shoots of the chosen oil palm trees are spliced, cultured and grown in test tubes. These shoots grow up to be identical to the 'parent' tree.

"Over the years, we have invested heavily in oil palm breeding and cloning. This has enabled us to improve the seeds for higher yields," Lodin said. "Our semi-clonal seed production technology ensures clients get consistent quality in every seed they buy from AAR." 

As the world's largest oil palm tissue culture laboratory, the facility at Tuan Mee estate is able to produce 1.5 million clonal palms in a year.

Lodin went on to explain that at prime fruit bearing age, the AA Hybrida 1S, planted in fertile soil and showered with consistent rainfall, is capable 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 per hectare in a year or more than two times higher than the country's average yield.

Another compelling feature of the AA Hybrida 1S is its dwarf stature, which allows for higher density planting. "Clients who buy our seeds can plant up 148 trees in one hectare compared with the current standard of 136. That'll translate to about 10 per cent more oil per hectare," he said.

Just like many are not aware of the extra edge that AAR's seeds offer, there is still not much publicity of the fact that LTAT has consistently outperformed other government-linked funds, such as the Employees Provident Fund. 

Over the last 38 years, LTAT has paid out annual dividends at an impressive rate of 10.5 per cent. In the last 10 years, the payout ratio to soldier pensioners averaged at more than 13 per cent. "I'm driven to unlock value in our assets to bring about good returns. That is what I monitor very closely," said the humble fund manager.

"We strive to do our best for 'the soldier boys'. As custodian of their pensions, it is our duty to bring in the best return for their money," Lodin said. Without missing a beat, he expressed gratitude and good fortune of having capable, dedicated and loyal lieutenants who make his job easier.

Plan to woo more China investments

SERI KEMBANGAN, Selangor: Malaysia is committed to attracting more investments from China, Deputy Prime Minister Tan Sri Muhyiddin Mohd Yassin says.

Currently, for every US dollar (RM3.15) pledged to Malaysia's economy, Malaysian businessmen pump in US$12 (RM37.80) into the middle kingdom's economy. "I would like to see the narrowing of investment gap in the years to come," Muhyiddin said.

According to the Statistics Department, Malaysia has nearly US$6 billion ( RM18.9 billion) worth of investments in China in the first eight months of 2011, while China has invested only about US$500 million (RM1.6 billion) in Malaysia.

Minister of International Trade and Industry Datuk Seri Mustapa Mohamed, meanwhile, said: "We will organise more trade missions to China, at least twice a year, to woo businesses in different provinces to invest in Malaysia," said Minister of International Trade and Industry (MITI) Datuk Seri Mustapa Mohamed.

He said a Malaysia-China Economic Cooperation Working Group has been set up to identify bilateral cooperation projects in nine areas including halal, industrial park, tourism, wholesale and retail. The group, made up of senior government officials from both countries, will draw up a five-year development programme by mid-2012, Mustapa said.

Both Muhyiddin and Mustapa were speaking at the third edition of the World Chinese Economic Forum here yesterday.

The deputy prime minister acknowledged that China is Malaysia's biggest export market, while Malaysia is China's largest trading partner in Asean.

"During China Premier Wen Jiabao's visit to Malaysia in April 2011, our leaders spoke of strengthening trade ties," he said.

By 2015, Muhyiddin expects trade between Malaysia and China to double and surpass US$100 billion (RM315 billion).

One of Malaysia's significant exports to China is palm oil, which is mainly refined into cooking oil for everyday use. During his second official visit to Malaysia then, Wen promised Prime Minister Datuk Seri Najib Razak that China will continue to buy big quantities of Malaysian palm oil.

In the first nine months of this year, China bought 2.95 million tonnes of palm oil, 9 per cent more than the same period last year.

Two weeks ago, at the China-Asean Expo held in the southern city of Nanning, Najib met up with Wen again. Both leaders pledged warmer trade ties. One of the significant joint projects included the establishment of the Malaysia-China Qinzhou Industrial Park.