Boustead Plantations sees property potential in Klang Valley, Johor land

PETALING JAYA: Newly-listed Boustead Plantations Bhd is sitting on thousands of acres of landbank in the Klang Valley and Johor that the group may consider converting into townships once its oil palm estates are past their prime.

Although it has yet to firm up any plans, Boustead Plantations vice chairman Tan Sri Lodin Wok Kamaruddin told StarBiz that the group’s 10,000 acres in Desaru and 1,400 acres in Kulai, both in Johor, and less than 1,000 acres in Balau, Semenyih, have medium- to long-term potential for property development.

“We believe these three parcels are prime. The Senai-Desaru highway, for example, links the Senai airport to our Desaru land.

“Our estate in Kulai is near Johor Premium Outlets. There is also the possibility of a third bridge between Malaysia and Singapore,” he said in an interview.

Part of Boustead Plantations’ Balau estate, a portion of which was carved out for the Malaysian campus of the UK’s Nottingham University, had been sold to Boustead Properties last year.

Its sister firm Boustead Properties paid RM107.3mil, or RM6.50 per sq ft, for 143ha in Balau, near the Semenyih town centre.

As property development is not a core business of Boustead Plantations, any property projects on its land will be managed by the Boustead group’s property arm.

According to PublicInvest Research, some of Boustead Plantations’ land in Semenyih and Seberang Perai Utara, which have future development potential, could be worth 84 sen a share, or RM1.35bil.

The brokerage has a fair value of RM1.74 for Boustead Plantations, it said in a June 9 note.

Boustead Plantations was last traded at RM1.60, unchanged from its initial public offering price.

Meanwhile, Lodin said the dry weather conditions caused by El Nino and higher biodiesel mandates could push up prices of crude palm oil to RM2,800 per tonne, if inventory remained below two million tonnes.

Palm oil futures fell to their lowest in over nine months on Friday amid expectations of a bumper US soybean crop, which rivals palm oil.

The benchmark September contract ended last week at RM2,346 per tonne, down 19% from a peak of RM2,901 per tonne earlier this year.

Malaysian Palm Oil Board data released on Thursday showed that palm oil stocks in June dropped to a one-year-low of 1.66 million tonnes.

“The immediate impact (of El Nino) may be minimal over the next six months, but if it is severe and extended, fresh fruit bunch (FFB) production could be significantly reduced.

“Young palms are more susceptible to the impact of El Nino compared to older palms. Fortunately, our current age profile will help minimise these adverse effects,” he explained. 

Close to 60% of the group’s oil palm trees are in their peak production age of between 10 and 20 years. Prime mature trees can produce over 25 tonnes of FFB a year. 

Boustead Plantations currently produces about one million tonnes of FFB annually within a total planted area of 71,000ha.

It is targeting to grow FFB production at an annual rate of 10% by increasing productivity at its estates and expanding its total planted area by 20,000ha within the next five years.

The group plans to install biogas facilities in all its palm oil mills by 2020, which would cut fossil fuel usage by 50% and result in savings of RM2.5mil per annum, Lodin said.

Since most of its mills are located far from the national grid, Boustead Plantations intends to supplement its own energy needs with the electricity generated from its biogas plants.

Only one mill is close to the national grid, and if the capital expenditure for the connection is viable, Boustead Plantations may sell excess power to Tenaga Nasional Bhd.

The income from this would conservatively be RM1.5mil per year, Lodin said.

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