KUALA LUMPUR: Chin Teck Plantations Bhd and sister company Negri Sembilan Oil Palms Bhd (NSOP) yesterday received shareholder approval for their proposed joint venture (JV) to develop a palm oil estate in Sumatra.
The 40,000ha plantation will be the group's second foray into Indonesia, the first being a 34,500ha established eight years ago, located near the current proposed project.
“Our existing plantation in Indonesia has been successful, so we are looking at further expanding our operations there.
“About 60% of the land has been planted and 35% of the total hectarage has started bearing fruit,” executive director for both companies Wong Aun Phui said after NSOP's AGM and EGM yesterday.
He said at the current crude palm oil price of RM1,450 per tonne, Chin Teck was beginning to see returns from its maiden project in Indonesia in which it had 35% stake.
Also, the group has substantial amount of cash - RM108mil for NSOP and RM132mil for Chin Teck - at the end of their respective financial year 2005.
The proposed JV involves Chin Teck and NSOP each subscribing a 40% stake in a Singapore JV company, Chin Thye Investment Pte Ltd. Chin Thye would, in turn, own 70% of Indonesian company PT Lampung Karya Indah, which is licensed to carry out plantation operations in south Sumatra.
With government approval already procured by the Indonesian partner, work on the new plantation would begin in two to three months, Wong said.
However, contribution to revenue would only be seen in the next five to eight years, he added.
On the outlook for the companies, Wong said earnings should improve as the crop for this year was expected to be better than last year while the price of crude palm oil was expected to remain the same.