+999

I never claimed that the scheme is better than listed oil palm companies. I am saying that this is fundamentally a different financial product. If anything, a possible comparison would be between the interest scheme business model and SPACs. Both are methods of raising money to fund a business. At least in the case of interest scheme products, you already know the tangible product that the money raised is used for. Money raised for SPACs are a lot more riskier, as you do not know what they will actually do with that money despite their investment mandate.

The reason that interest scheme products are pricier / makes you think that it is inflated is because of how it is structured. The price of the product includes the fixed returns of the first few years. Eg: for our product, whenever an investor invests in a plot (RM 8000), our 7% guaranteed returns for the first 5 years is actually derived from the initial investment. So, out of this RM 8000, our trustee actually keeps (7x5=)35% + 10% (contingency) = 45% of the money with them. The company receives the remaining 55% to be used as capital for the business.

Fundamentally, the interest scheme model is just a different financial product whose model has been used and tested around the world. It is just unfortunate that in the case of Malaysia, there has been a high profile incident which has marred the whole industry. Also, arguably, the regulators have not been doing a good job regulating this industry. Things will improve though, when the upcoming Interest Schemes Bill is introduced.

Just think of it in another way - if one of the SPACs were to crash, the rest of the SPAC industry will surely be affected as well.

re: fertilizer prices, there are some correlation between prices and CPO prices - http://palmoilis.mpob.gov.my/publications/...v5n1-nasir2.pdf. Again, we are also aware that prices will increase in the long run. That is why we are not promising any unrealistic fixed returns.

i disagree with you re: peat soil. many advancements have been made with peat, and yields are in general higher than mineral. You can google around for this. Eg: http://www.thestar.com.my/Business/Busines...states-are.aspx
There's even a whole research department set up by the Sarawak government to improve the ways that peat is being used. Also, RSPO doesnt command much of a premium anyway compared to the costs that is spent. RSPO itself has been subject to many criticisms of being just another form of protectionism tariff.

OER - if anything, the company will of courses try to achieve a comparable OER with well managed plantations. You speak as though the company doesnt want to succeed or something.

re: comparing to large plantations - again, this is fundamentally a different product. Sure, the land that they own does go up in price, but how do you know they will sell it down the road? even if they do, there is no guarantee that investors can receive a large payout. In the case of this scheme, the mandate of the scheme is such that investors will get to enjoy the capital appreciation from the sale of the plantation down the road.

re: why dont the company take loans / want to do this scheme in the first place
well, large scale palm oil plantations are very capital intensive ventures. the interest scheme model is just another way to raise funds to reduce financing costs. you can similarly argue about SPACs. "Oh, Oil & gas is so lucrative, why do they need to raise money via a SPAC ? why not approach a bank? " Well, not all banks are willing to lend money to entrepreneurs. Startup business owners can definitely understand this point. Also, if these alternative fundraising models do not exist, then all industries will just be dominated by established big boys.

This post has been edited by suewong85: Dec 23 2013, 10:01 AM

1. SPAC is created in mind with protection for investors, your planting schemes has no such protection nor actual ownership of assets or the company. A SPAC is obligated by law to return 90% of the money collected if the company cannot find a suitable investment within 3 years. Also any asset to be acquired requires voting by non-interested shareholder (ie minority shareholders). You actually own a piece of the business and any assets there. your grower scheme have zero protection and you do not own anything other than a promise, so there is absolutely ZERO comparison. Can the scheme GUARANTEE 90% back and give minority to vote on business direction? No.. then why are you comparing.



2. You are AGREEING that you are robbing peter to pay paul. Why do you have to return the investor money (the 45%) back to them and claim it is dividend? If you pay yourself out of your own pocket and assets is NOT called a dividend. You are clearly misleading your investors. Why not make it easier and sell the plots at 45% discount? why don't you tell me the lucrative 'cut' that each salesman takes as well, can consider part of capital? Also you still have not mentioned why a FULLY PLANTED MATURED palm oil land & listed pallm oil plantation is still CHEAPER than yours (even after 45% discount)?



Yeah I wait for the day IF it is legalized since your current scheme have zero protection as minority investor, ZERO equity, ZERO ownership & ZERO accountability. Even BNM warned against all these interest scheme.. why I wonder?



Oh.. now no need RSPO, so your planting will be indiscriminate and doesn't matter if you destroy the environment as long as you make a buck?

And your palm oil mill who owns it? Since you sell plots only?

Yes I have been wanting to hear what is your expected OER that you can achieve.. this way we can COUNT the projected earnings. Also you have not answer why your SCHEME is expected to get 24ton per ha yield while others can't?



Another misinformation, you can REALISE the land bank gain by SELLING your shares, why have to wait until the company sell their land? If their land appreciates, I am sure the share will do so accordingly. Also why bother to sell the land, when i can have the land producing for me indefinitely? If you have a golden goose laying golden eggs every month, will you sell it off after 20 years even if it can still lay eggs? Doesn't make sense to an investor...

Oh by the way don't tell me the tree getting old not productive anymore. Heard of replanting?

This post has been edited by gark: Sep 11 2013, 07:11 PM

Gark, good point u listed it out here. Many scheme can easily claim to have highest OER, lowest cost, but worse of all, they are not involve in this industry for decades!

Btw sue, where is your land located? The peat soil thingy can't achieve such a high OER lah, my dad involved in plantation for 3 decades say so.

I did some searches on info of the people behind this scheme. As the scheme is new and without track records, I think it would be useful to see how their existing companies are doing to roughly gauge their management skills. When investors invested in CHGS, we knew who LKY is and how his companies are doing.

The big boss and CEO is Dato Allan Lim Kim Huat. In the profile of the website, Dato Lim is also the Executive Chairman of Widetech (Malaysia) Berhad and MD of Ablegroup Berhad, 2 companies listed on Bursa. He has about 100 other companies of which he is a director or shareholder. The other director of this scheme is his son. There are only 2 directors in this company

Financial of his public listed companies - Widetech

FY2012
Turnover RM8.9m
Loss -RM1.1m
EPS -RM3.08
Dividend Nil

FY2013
Turnover RM9.4m
Profit RM2.3m
EPS RM1.85
Dividend Nil

It made losses for FY2010 (-RM1.4m) and FY2011 (-RM436k). Loss in FY2012, but turnaround in FY2013 But for 1Q FY2014, it went back to a loss of -RM218k. No dividend declared for the last 4 years. Closing price today is RM0.445 (considered penny stock ?)



Financial info of Ablegroup

FY2011
Turnover RM22.9m
Loss -RM50.3m
EPS -RM30.94
Dividend Nil

FY2012
Turnover RM8.0m
Loss -RM8.5m
EPS -RM3.31
Dividend Nil

The company also made losses for 2009 (-RM17.9m) and 2010 (-RM56.8m). Losses continue in FY2011 and FY2012 and also in 1Q and 2Q FY2013 (-RM222k). No dividend declared for the last 4 years. Closing price today is RM0.135 (penny stock)

The above info are obtained from KLSE announcement and other public available website. Please re-verify if you intend to make decision based on the info. I cannot be held responsible for any mistake in the numbers

Only did searches on the 2 companies which was listed in the profile. If there are some other companies listed under the boss' profile, we can also do further searches.

+1
Good point u listed it out here.

1&2 - There are also many people who would argue loudly that SPACs are bad investments, etc. You can see http://dealbook.nytimes.com/2013/08/13/a-t...f-failure/?_r=2 or http://www.kinibiz.com/story/issues/46323/...investment.html. In some countries, SPACs have a very bad reputation too because some high profile ones failed. This is the case now with the interest scheme business model in Malaysia after the failure of a high profile scheme. The interest scheme model is not something new. This sort of fructuary / share farming schemes exist in other countries too. Like SPACs, there are successes and failures in other countries as well.

Your 'robbing peter to pay paul' argument is just your disagreement with the interest scheme business model. Again, many people can raise similar disagreements with the SPAC model as well. Maybe you would be one to defend it then. At the end of the day, we can just agree to disagree that the interest scheme model is viable. we are looking for like minded investors. clearly, you are not one of them. perhaps you should just invest in SPACs.

Moving forward, the introduction of the Interest Scheme bill will help to strengthen and improve the industry. Currently, SSM is already seeking public feedback for the drafting of the bill. They have posted ads already. When the bill becomes a law, of course companies in the industry will have to comply. We are only more than happy to comply. RE: your worries about the lack of safeguards - we do have an independent auditor and independent plantation consultant who publishes their report alongside our prospectus. Also, the trustee have wide ranging powers. Investors can also vote to remove the management company shold they feel the need to. All these are spelt out clearly in our prospectus. Lastly, the best safeguard? Come and see the plantation yourself.

BNM did not say anything about interest schemes. You wonder wrongly. They only warned against get rich quick schemes like Genneva (officiated by top politicians, nonetheless). You can see all their announcements here: http://www.bnm.gov.my/microsites/fraudalert/ ; http://www.bnm.gov.my/consumeralert/

re: mills, the company will operate the mills of course. it is a progression of diversifying downstream.

OER - we do aim to hit the industry average of 20%, which is not unachievable.

re: 24 tons/ha - the company aims to hit that figure some time during the harvesting stage. of course, the company will not hit that right off the bat. these figures depends on things like tree profile, etc. in our case, the company is confident of hitting it eventually because of the fertile land. the land is surrounded by other productive plantations, all who are highly profitable too.

lastly, once again, interest schemes are different from shares. share prices are also volatile. IOI 5 years ago was about RM 3.50. Now its RM 5.40. At one point it hit RM 2.30+. At its peak it was RM 8.20+. If you bought in when it was high at that price, now you would be cursing and swearing too.

RE: replanting - it is also in the prospectus that investors can vote for the option to replant after the end of the scheme too if they feel that they do not want to sell the plantation.

This post has been edited by suewong85: Dec 23 2013, 10:03 AM

The point is the guaranteed returns has nothing to do with planting.....that's an expensive way for an investor.
That being priced into the investment makes the price per acre extremely expensive without ownership.

BTW I see that you plan to build a mill next year. Is this in Sarawak?
If so, you need to be looking at ZERO discharge. Theres NO ZERO discharge equipment yet.
TILL NOW. My group has invented an equipment to separate the waste oil from the heavy solids in the POME.
You could improve yer OER and clean up your mill and bring it to ZERO discharge with another piece of additional equipment
or recycle the water recovered.
They have tested small scale equipment on the oil separation and recovery for more than a year. They are now starting to test FULL scale unit
TODAY.
This piece of equipment will replace your POME ponds. NOMORE POME.
If you are interested pls PM me.

This post has been edited by prophetjul: Sep 12 2013, 09:30 AM

Recycling all the old information again and again like a broken clockwork. You still have not proved that your scheme is safe, you are mere doing selective comparison against one company and or another scheme. SPAC have investor protection and yours does not, period. Anyway I dont like SPAC as well as I think they are bunch of con men as well. The plantation next to you is highly profitable becase they did not buy OVERPRICED land. And robbing peter to pay paul is already proven in your own words.

Let cut to the chase. Lets use all the figures you have supplied.

You have mentioned 24 t/ha, although peak production of palm oil is at age 8-14, younger and older than that you will have a decline. Never mind assume your trees are in forever peak production.

1 ha = 24 tons/yr = 9.712 tons/ acre = 2.428 tons / plot

Lets say your cash cost (manpower, fertilizer, trimming, utilities, transportation etc) is very efficient at RM 1,500/ton (Better than 90% of listed plantation out there). In before you say your worker super efficient (maybe work for free?) and can buy fertilizer below market price.

This cost is excluding administration cost, you do charge management fees, but lets say your Dato is feeling very charitable and doing all the management for free.

2.428 ton FFB x 20% OER = 0.4856 ton CPO

Assume you are able get MAX market price (In reality you cant cause you have other logistic/transportation expenses) which today is 2,350 per ton. This time Dato provide the transportation for FREE. Also the mill have not take the cut yet.. also assume FREE

Your net earning per ton CPO will be 2,350-1,500 = RM 850 per ton

1 Plot = 0.4856 ton x 850 = RM 412.76

Cost of 1 plot = RM 8000

Net earning yield = RM 412.76/RM 8000 = 5.15%

If you remove the other cost such as management, logistics etc , your yield will be likely below 3%.

So answer, this where is your projected 7%-23% dividend?

This post has been edited by gark: Sep 12 2013, 10:23 AM

Wow! Serious discussion going on here.

Me just in to say it's time for shopping!

Both cheques received with a letter of apology explanation attached from Tan Sri.

Ok, I'm outta here, continue serious discussion.....

SPACs - investor protection? Tell that to the investors of the 72 SPACs that have been liquidated since 2004 worldwide. There are risks in every product. all products have successes and failures cases, be it SPACs, interest schemes, hedge funds, PEs, mutual funds, unit trust, etc. You dont like SPACs? Well, some people do. some institutional investors do too. everyone has different risk appetite. if you are so risk averse, perhaps you should just hide your $ under your bed or put it in a FD, because banks totally will never collapse right?

again, the 'robbing peter to pay paul' part is merely your words, not mine. this is financial structuring of a product, not any different to other industries where securitization can happens. you can also see this in real estate where there are concepts like DIBS, or 2 years 7% rental income guarantee, free legal, SPA, etc. All things are of course priced in. This is a legal sweetener. Nothing wrong about that.

re: your calculations, i disagree with many parts. many of the extra costs u add are already priced into the break even point / operating margins.

Cost of production is not RM 1500. It is lower than that. You are making things up, like "better than 90% of listed plantations", just like your " bnm warned against this" allegation. You are also assuming that we wont try to improve to reduce cost by improving efficiency.

"CPO futures prices are not likely to break the RM1,800 ring-git per tonne mark and even the most inefficient oil palm plantation companies producing CPO within the RM1,500 per tonne levels will be able to stay profit-able in these bearish market conditions.”
http://www.theborneopost.com/2013/03/17/pa...ish-or-bullish/

"Currently, the cost of production (COP) among well managed oil palm plantation companies in Peninsular Malaysia would be about RM1,300 to RM1,400 per tonne of CPO."
http://www.thestar.com.my/story.aspx?file=...43&sec=business

Upstream margins are always high - up to 50% or higher. In fact, larger corporations See http://www.theedgemalaysia.com/personal-fi...m-oil-palm.html

See Nomura's Asean Palm Oil Research, April 9 report.


the projected returns are tied to palm oil prices. If palm oil prices are high, then investors will get a high return too. The company will return 100% of our net audited profits, minus a 5% management fee. simple as that. nothing unrealistic or overreaching.

the company is also optimistic of palm oil prices rebounding in the future when they reach the harvesting stage, and there are good reasons to believe that it will. your calculation is based on today's weak prices.

This post has been edited by suewong85: Dec 23 2013, 10:07 AM

No I am not risk adverse, I am merely pointing out SPAC have more investor protection, I do not necessary favor it. Do you know how many share farming scheme has been liquidated in Malaysia? I am also pointing out investing in LISTED PLANTATION is cheaper/better than share farming.

YOU are misleading the INVESTOR by telling them 7% is a DIVIDEND, if it is not DIVIDEND please kindly delete it from all your brochures. Legal sweetener as it may be but you are miss selling. Miss selling is against the law...



Ok let's reuse your figure of 1,300 per ton since you say you are sooooooooo efficient (your words not mine!) & 5% management fees. BTW please check the cost now as fertilizer is priced in USD, the report you have is 6 months old. Try also to check the cost of production on SOP and Sarawak Plantations.

Net profit per ton = RM2350-RM1300 = RM 1050

Net income on 1 acre = 0.4856 x 1050 = 509.88

Minus 5% management fees = 509.88 x 0.95 = RM 484.386

Yield = 484.386 / 8000 = 6.05%

It is STILL BELOW your projected earnings of 7%-23%, what other explanation do you have? The maths simply do not match...



Hello the price is for RM 2,800 per ton now is selling at RM 2,350 per ton.. how to compare. And I agree that the ROIC is achievable IF you do not buy overpriced land. The higher capital you put in (ie overpriced land) the LOWER the ROIC, no need for me to write example right....

And how can be 100% sure palm oil price will be higher in the future and if higher then how much? If you can predict 100% better don't be salesman/woman go bet on CPO futures and make millions. And tell your clients the same.

This post has been edited by gark: Sep 12 2013, 04:00 PM

the word the company used is 7% guaranteed returns. once again, you are not referring to any of our materials / prospectus, but talking from your own misconceptions / prejudice.

re: investing in shares, again, i have pointed out, that 1- share prices are volatile, and dividends are lower. the investment profile is complete separate, as these are separate type of products.

the projected earnings is based on CPO prices being RM 2500 - RM 4000. This again, along with a projected earning chart, is clearly stated in the marketing materials. if prices go below that, then the company can only pay lower dividends. Once again, you are just talking without referring to our actual materials.

again and again, i have pointed out articles, research reports, papers, etc to refute your words. i cannot please everyone. there will always be people who believe in a product, as well as naysayers.

re: future palm oil prices, i of course cannot make any predictions. what i can say though, is that we are optimistic about the potential of palm oil, based on the supply and demand of palm oil. palm oil is widely used in everything, and is cheaper than other vegetable oil. fast developing countries are increasing their per capita consumption of palm oil as they become more prosperous.

palm oil however, cannot be planted everywhere in the world. cultivatable palm oil land in this region is dwindling, forcing companies to go to foreign countries (png, liberia, colombia, etc) where they do not have local knowledge (political, labour issues, etc) to palm. initiatives like biodiesel (b10 in malaysia, indonesia) will also help to support prices. other initiatives like the POIC are also allowing plantations to get revenue from palm oil waste like empty fruit brunches (EFB) for the biomass industry. also, in the country, organizations like MPOB and Pemandu are also working to improve yields and OER - see the ETP report. therefore, the company are optimistic about the palm oil industry.

This post has been edited by suewong85: Dec 23 2013, 10:10 AM

That Star article was July 14, 2011.

Perhaps you also miss this in the same article?



Its Sep 2013, three years on. Hows the production costs NOW?

http://www.gapgrowers.com.my/golden-agro-growers-scheme

I think as investors, they would like to know how their RM8k p plot produces 7% for the first 5 years, seeing
that the investment per acre is rather HIGH.

I would not say that land for palm oil cultivation is dwindling with respect to demand. In fact, I think not







http://www.pecad.fas.usda.gov/highlights/2013/06/indonesia/

So in grand conclusion... for all potential buyers out there.

1. The 7% guaranteed returns in paid for by your own pocket, which is not an actual RETURN, from the sale of overpriced land. In this case the buyers actually LOSE income ability (lets say if the 45% can put into FD) and provide interest free loan to the scheme.

2. This scheme with the projected return of 7%-23% ONLY APPLICABLE IF the CPO price goes up, if it goes down or stay flat, well tough luck. This makes the return somewhat very volatile instead of the wording used in the brochure to imply consistent income.

I am still in the opinion (my view only of course) that if one is to invest in a LISTED palm oil plantation you can get better value for your money, capital gain and more investor protection together more accountability. It is a safer and cheaper alternative per ha compared to share farming scheme.

And oh, if suewong85 predict the palm oil prices can go to RM4k/ton with her optimistic view on future returns, you can make a huge killing by investing in a listed palm oil plantation, as their profit would easily triple. (If profit triple, wonder what will happen to their share price)

Anyway nice exchanging ideas with you, and let the buyers makes the best decision, since it's their money anyway. They have every right to lose it.

This post has been edited by gark: Sep 13 2013, 09:58 AM

There is going to be at least 300k-400k ha of matured palm oil coming out of Kalimantan every year for the next 5-6 years. Most refineries in Indonesia is currently running at 30%-40% because of softening demand from China & India.

Only the most efficient growers and most efficient refineries will survive for the 2-3 years, until palm oil demand is back on track.

I am however very optimistic on the business is growing in the future, but not all plantations are invest-able. Only those with consistently high FFB yield & OER with favorable soil & tree maturity profile will do well.

Might as well invest in CPO FUTURES if one is so sure about the rising CPO price?

Yes....will be oversupply at this rate IMO.

I can help them with their OER......... at least 0.5% more

Even 0.1% more OER makes a big difference.