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.

3 Responses to Ex-servicemen get fruitful return from golden crop

  1. Since Malaysia is the world's second largest producer of palm oil, I would imagine that thousands of dollars will go to the pensioners who used to be soldiers. That's good news for them after spending years defending their land.

  2. Boustead Holdings Bhd's dividend yield is 7.1%, much, much better than putting money in fixed deposit.

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