MKH investment in palm oil bearing fruit

by **Cals** Mon 25 Nov 2013, 01:28

Published: Saturday November 23, 2013 MYT 12:00:00 AM
Updated: Saturday November 23, 2013 MYT 6:36:43 AM
MKH investment in palm oil bearing fruit
BY DANIEL KHOO

THE plantation business was never high on MKH Bhd’s corporate agenda until recently. The company, formerly known as Metro Kajang Holdings Bhd, has been built by the property business which it started with over 33 years ago. MKH’s founder and executive chairman Tan Sri Alex Chen sat with several journalists at a recent press visit to the company’s plantations arm located at the interior of east Kalimantan to tell the story behind this foray into the plantations industry.
“I obtained the experience in the plantation business almost 38 years ago. One day I bought a piece of land at the place which is known today as Putrajaya – about 100 acres of land next to Kuala Lumpur Kepong’s estate. Because of this, I do occasionally meet with KLK’s founder Tan Sri Lee Loy Seng when I pay him a visit at his estate.
“I told him that his oil palm plantation estate looks very beautiful and this bolstered my ambition to eventually own one like his. I thought this business has a bright future,” he says.
He eventually started his own oil palm plantations at Tanjong Sepat, Selangor after convincing his father to buy a piece of land costing almost RM700,000 or RM2,225 per acre, which was sold soon after Chen recovered the initial capital cost.
“Despite selling it, I still took a keen interest in the palm oil industry and hoped to own one of such estates in the future. But the price of land became too expensive in Malaysia and I could not accept it,” Chen says.
An opportunity came knocking on Chen’s door about seven years ago where he got to know some Indonesian government officials who invited him to invest in Kalimantan’s palm oil industry.
Chen grabbed that opportunity. The size of the land was 15,900 ha, and his prior experience was managing 300 acres. The 35+25 years plantation is located about 75km from Kota Samarinda, the capital of east Kalimantan, and is parked under its Indonesian subsidiary PT.Khaleda Agroprima Malindo.
Today, MKH’s oil palm plantations estate is 98% planted or about 15,655ha of total planted area inclusive of road drains and cannals.
A 60 tonne per hour CPO mill within the plantation is running at full capacity and is in the process of being upgraded to a capacity of 90 tonne per hour. This upgrade is expected to complete by June 2014.
Indeed, the company’s plantation operations has begun to see a return.
In the first nine months of its 2013 financial year (FY2013), its plantation division achieved a revenue of RM76.1mil and an operating profit of RM20.3mil, against an operating loss of RM12mil in the corresponding period last year.
MKH says the yield achieved was 29.9% higher than the budgeted yield and it recorded its highest ever yield of 25,996.64 tonnes per ha in September 2013 since the commissioning of the oil mill in October 2011.
“Our vision is to eventually own up to 100,000ha in five years. Our projections moving forward is to derive 50% of the group’s profit from plantation by 2017, even with the present 16,187 ha of plantation land,” Chen says.
“Plantation companies usually get their crop in 30 to 36 months after planting but we manage to harvest it in 22 to 24 months. It grows much faster and produces fresh fruit bunches earlier because we are located along the equator where there is a lot of water and sunlight.
The company says operations also benefit the local populace of about 3,000 people as it provides workers there with shelter, water and electricity, a school, play areas, clinic, three mosques, a church and even Automated Teller Machines (ATMs).
“When we first came here, it was a very different scene as many people here in the interior were not adequately clothed. Today their living conditions are much better. The ATMs allow the workers to receive their actual wages as these are automatically banked into their accounts rather than going through a middleman,” Chen says.
MKH continues to find favour with the Indonesian authorities and the latter has also invited the company for industry level functions and meetings.