Asian Plantations Limited is a Singapore incorporated company with 100% owned Malaysian subsidiaries that are involved in the acquisition and development of palm oil plantation land in Sarawak, Malaysia.
The Company’s business strategy is to acquire under-priced, properly zoned agricultural land in Malaysia which can be developed into high-quality mature palm oil estates. In Malaysia, titled agricultural land is near depletion due to the high percentage of forest zoning, approximately 60% of Malaysia’s land mass, which limits expansion of the agricultural industry. By comparison, most western countries such as US & UK have protected less than 25% of their land mass as a forest or forest reserves. We are of the opinion that Malaysia is a superior location for the development of palm oil estates due to its rule of law, local financing and numerous exit options for planted farmland.
The Company currently owns three estates totaling 15,645 hectares (38,600 acres):
- BJ Corporation: a 4,795 hectare (11,848 acres) estate in Sarawak, Malaysia with is less than 3 hour drive to the regional cities of Miri and Bintulu. We acquired this estate in December 2007 and commenced the field nursery in early 2008 (seedlings grow in a nursery for 9 to 12 months before field planting). “In-ground” planting works were initiated on this estate in 1Q 2009. We expect to harvest fresh fruit bunches (“FFB”) from this estate in 4Q 2010 and to complete planting works by 2011.
- Incosetia: a 5,850 hectare (14,455 acres) estate in Sarawak adjacent to the BJ Corporation estate. We acquired this estate on December 2009 and a portion of the land (<1,000 hectares) was already planted and several years mature. As such, we are currently harvesting FFB from this estate and selling it to a local palm oil crushing mill which in turn processes the fruit in to crude palm oil (“CPO”). The remainder of the estate is unplanted. We have initiated the nursery for Incosetia and will commence in-ground planting works in 4Q 2010. We expect to complete planting works at this estate by 2012.
- Fortune: a 5,000 hectare (12,355 acres) estate in Sarawak adjacent to the BJ Corporation Estate. We acquired this estate in August 2010 and a portion of the land (approximately 1,500 hectares) was prepared for planting which reduces our future capital expenditures. We have initiated nursery operations and expect to start in the ground plantings in 4Q 2011. We expect to complete planting works at this estate by 2013.
The abovementioned estates hold agricultural title certificates which are the highest form of legal title for plantation companies in East Malaysia under the Land Code. Whilst our fields are largely largely underdevelopment, Asian Plantations is currently larger than other long-standing listed plantation companies such as Unico-Desa Plantations Berhad.
The Directors believe plantation land development, for palm oil, is the “sweet spot of agriculture investing” as the cash cost of developing a hectare of plantation estate in Malaysia is approximately US$7,000 per hectare “all-in” to maturity over a three year period. Approximately 2/3 of this cost is leveraged at competitive terms from local and international banks in Malaysia. Mature palm oil land is valued by the public markets between US$20,000 to US$30,000 per hectare. We are continually assessing additional land acquisition opportunities on mineral soil land – APL does not and will not develop estates on “peat” soil.
We are now developing our own crushing mill utilizing the latest vertical sterilizer technology with methane recapture. We are now securing the necessary approvals and licenses for a 90 tonner per hour mill upgradeable to 120 tonnes per hour – this would be one of the largest mills in Sarawak and in our opinion, the most technologically advanced in the region. The CPO would then be transported via truck to Bintulu (approximately 100 km away). Bintulu is a major CPO refining centre and deep-water port in Malaysia with multiple refineries, including one operated by Wilmar International which actively compete for CPO purchases from the local crushing mills. From here the CPO is refined into cooking oils and fats which are then exported around the world (China, India, USA, etc) for use in cooking, processed foods and consumer products such as soap and shampoo. Edible oils are a key component of the human food chain, like starch or protein, and palm oil represents the lowest cost and smallest environmental footprint to produce the edible oils that humans need. One hectare of mature palm oil produces the SAME amount of edible oils as 10 to 15 hectares of soya, rapeseed or canola.