KUALA LUMPUR: Kim Loong Resources Bhd (KLRB) is looking at expanding its palm oil upstream operations in Sarawak in its quest to become an integrated plantation and milling company.
KLRB executive chairman Gooi Seong Lim said the ideal location would be in Sarawak as the company would be able to acquire sizeable land at reasonable cost.
“Sarawak is a good place in the sense that its infrastructure is very good and accessible. It is still within Malaysia and it would be easier for the management to monitor activities,” he said after the company AGM yesterday.
KLRB currently owns and leases 15,720ha of plantation land in Malaysia. Of the total, 11,884ha are located in Sabah, 2,743ha in Sarawak and 1,093ha in Johor. The group has three mills, two in Sabah and one in Johor.
Seong Lim said the group is looking for a “sizeable” land acquisition. He added that in order to have an integrated plantation operation, the group would have to acquire at least 30,000 acres (12,000ha) of estate land.
Seong Lim said the group’s management has been in talks with several parties, but has not concluded any deal yet.
“We would probably enter into a joint venture arrangement with the Sarawak locals under the native customary rights (NCR) scheme to develop some state land.
“If the acquisition is suitable and viable, we would consider entering because palm oil is a long-term investment so we have to be very careful,” he said.
KLRB’s current plantation land in Sarawak is in the Pantu area, near the Tenggang River. The group will either expand its land in Pantu or look for any other land with the right criteria for oil palm plantation in Sarawak.
The group has allocated RM10 million in capital expenditure for its operations. Seong Lim said the figure would increase when the group has purchased the land.
He said the group has a substantial amount of cash reserve which could be used for the land acquisition and development. As at Jan 31, the group had RM190.91 million in cash and bank balances.
KLRB managing director Gooi Seong Heen said crude palm oil (CPO) prices are expected to hover around RM2,500 per tonne until next year.
“Europe has to recover first before prices have any chance to go up,” said Seong Heen, who is Seong Lim’s brother. He sees KLRB’s earnings as quite flat this year depending on CPO prices.
“Hopefully our earnings will be better than last year, but then it is hard to say because we are facing the peak in crop season. (Therefore) we don’t know how demand will be like,” said Seong Heen.
KLRB recorded a 13% drop in revenue to RM137 million for the first quarter ended April 30 from RM157 million in the previous corresponding period. Its net profit fell to RM14.12 million from RM17.39 million a year ago.
The decrease in revenue and net profit was mainly due to lower CPO and palm kernel oil prices.
This article first appeared in The Edge Financial Daily, on July 30, 2013.
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