Yes, as I'm typing now, the KL CPO Future Index is at 1380-1430 for Jan-Apr 2009

Hi Michael J, much thanks for your detailed explanation. For your question, the CPO payout is fixed at 8% during planting phase which takes 3 years, irrespective even if CPO price drop to 0.

The low CPO price is a major issue for commodity trading or if you own your own plantation and need to survive based on your yeild/harvest during economic crisis, but for CHGS, there is no effect as you are not buying and selling palm oil futures & by harvest time in 2 years we would have passed the crisis level. CHGS investment totally different from commodity trading which many seem to confuse with. :-

1) The major part is you are investing in land. Price of land goes up irrespective of what is planted on the land. Of course, if you have something valuable planted that will increase the value. For each 1/4 acre plot your investment is RM8000 so at exit point during maturity (in 2030), the price would be at land value during 2030. If we use historical data plantation land value goes up 15-20% a year. By exit point a low estimate will be 400-500% return. So unlike normal FD or amanah saham where you only get back par value upon exit, here your value increases as inflation increase. For people who r into economics, land is inflation proof as the higher the inflation the higher the land value goes up. In particular plantation land where it is getting less and less due to scarcity and more being used for development. This is the very reason why our forefathers believe in land based investment and landed property. If you have any older generation contacts who has plantation land or landed property, most of them bought it 20-50 years ago will tell you that the price today has gone up tremendously. In fact, if you own 500 acres of land which also generates regular income, it will be an asset that you will enjoy nicely .

To quote CNN Money.com, "Real estate, after all, is the quintessential scarce resource. You simply can't go out and create new land. So it seems only natural that its price would keep going up and up. "  It is always good to accumulate land based assets that can generate you more regular income. I agree with D-Tourist that land is gold   
2) 2ndly, yearly income is fixed at 8% during planting phase. So in actual fact it is a blessing that the economic downturn came about during planting stage as this as 0 effect on your payout.

In fact, economic downturn is a very natural outcome every 8-10 years. During the last cpo downturn at 2000-2001 the price of palm oil dropped close to production cost which at that time was about 800 but within 1-2 years as natural economics takes course it went up back to the 1300-1500 which at that time was equivalent to our 2200-2500 level. Prices only went spiralling up during recovery all the way to 2008 which means you can also expect another 8-10 year cycle of positive growth.

For most people, they panic when economy and generally every industry as well as stock market crash and priced dip to the low point now, but that is why 95% of the world population stay poor and why the smart 5% see opportunity in times of crisis. In fact, we should follow how Warran Buffet invests with a 3-5 year view. After all he didn't become the world richest man by mere accident.

As production cost increases every year as what you have pointed out, the lowest CPO level will be at production cost so lets say 1200-1400 depending on how efficient your management is. So production cost itself has increased within 8 years by 50%-80%. In another 8-10 years when CHGS actually faces another cycle of economic downturn, the production cost will naturally be at 1700-2100. In other words, the yearly payout for CHGS will average out at 12-15% over the rest of the 20 years from 2010-2030 if you agree with my calculations of using past production cost average.

3) One question you may wonder Michael is that in the even during harvest if the CPO stays at 1400-1700 and if the management co. does not earn much, how do they get the money to pay the payout of 4-9%? The answer is that BHLB Trestee is allowed to put the investment into non-speculative funds ie. fixed deposit at local or foreign banks. So during these times, the fund is already making money for the management co. In actual fact this investment was designed in such a way that even during crisis, your payout will at least be on par with bank FD or slightly higher.

Dividen payout is as follows during harvest :-

yearly average
2100 above - 12-17%
1900-2099 - 10-15%
1700-1899 - 8- 13%
1500-1699 - 6-11%
1300-1499 - 4-9%

4) Btw earlier on you asked me about the independant consultant which will furnish a report every 6 months, the report is already out on our latest prospectus at www.chgs.com.my .The name of the independant consultant is Trans-Agritech Management Consultancy Sdn. Bhd. Are you familiar with them? In summary 500 acres already started harvesting ahead of schedule however they noted more workers are needed for the balance of the plantation to acheive worker/land ratio of 1:8.

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Added on October 25, 2008, 2:45 am

Hi non grower,

The governing body for non-banks is not bank negara. In this instance the relavant authority body is CCM and Ministry of Finance in which the approval was granted before this investment was launched. In fact, our then minister Datuk Ng Yen Yen made a visit to the plantation on behalf of MCA wanita which it was launched first before opening for public investment. Besides CCM & Ministry of Finance, we also have a few major banks which have performed due diligence before they approved CHGS investment and marketed for their CC holders which included Citibank, RHB, Maybank, Ambank (both Ambank & MBF cards) among others. In fact, before Citibank approved the investment it had to go through citibank new york which did its due diligence before granting the approval to Citbank malaysia. During the due diligence among its check is to find out whether this investment is viable and secure.

Among the requirements from CCM is that all payments must be paid to BHLB Trustee (owned by CIMB group) so that the investor funds are protected and secondly, BHLB Trustee also holds the land title as security. Besides this, there is also a capital guarantee clause which states that should any untoward incident happens to terminate this agreement eg. bankcruptcy, mismanagement, breach of contract by management co. etc, BHLB Trustee shall return each investor their original capital.

Btw if you have time do drop by this weekend's Bumiputra Property Fair 24-26 October at Midvalley Exhbition Hall, Level 3, Midvalley. You can find out more as there will be a free presentation on CHGS and feel free ask as many questions ask you like without any obligation Our booth is no. 3061.

Hi cute boboi,

Maybank is one of our marketing partner for CC payments. Actually for all marketing partners if you use CC for payment, everyone is entitled to the free hotel promotion. The price is supposed to be RM8000, should not be RM9000 as our approval from CCM is up to 8000 for this phase. Maybe it is a typo as all our other bank forms state RM8,000.

As to your question on jan-apr future price, it changes day to day upon the daily cpo price. If today's price is low, so will jan-apr. If it goes up again, so will jan-apr.

Hi tanmat,

As mentioned earlier even if the CPO is 0 there is no effect on the dividen during planting phase. It is guaranteed at 8% for the next 2 years until economy recovers. As a land investment it is totally different from commodity trading.

In fact, other land investments which you may know of like UKland offers totally barren agricultural land as land prices itself will increase. However in this case CHGS land is not barren, the added advantage is that there are yearly payouts throughout your investment period besides the lump sum capital gain at the end.

Agricultural land investment is new in Malaysia but has long proven track record in many other countries. Do you know that land prices generally increase faster than house prices? Not only in Malaysia but other parts of the world as well - see http://www.perfectplot.co.uk/cl11022008.asp

The more value added facilities nearby the land the better the value for the future. For CHGS, before we started the land had no main access road, but just recently a highway was build across it which is good news for any land invesment :-

Hi Non Grower,

The structure goes like this.

1. Ministry of Finance
2. Under Ministry of Finance, there is Bank Negara and CCM.
3. Bank Negara handles all bank related matters.
4. CCM (Companies Comission of Malaysia) /SSM (Suruhanjaya Syarikat Malaysia) handles all non-bank related matters - ie to act as agent of the Government and provide services in administering, collecting and enforcing payment of prescribed fees or any other charges under the laws administered - see http://www.ssm.com.my/en/corporate_power.php

Hope you understand. For the organisation structure of investments, you can also refer to Ministry of Finance.

The companies that were raided by CCM was because they dealt with foreign land investments which has no CCM approval. Not only that, some of them do not even have any authority to sell the land in their mother country which was in UK and Canada. They were merely using investors money to roll. Which also explains why the land is a barren agricultural land. Many investors were duped into it & it was just a matter of time that the scheme was exposed. So please be careful of land investment if there is no CCM approval. Don't get involved.

With your regards to collection of money, it is also the similar for CCM's requirement. One of the requirements for CCM for this investment is that there must be a Trustee who undertakes as a guardian for the investors. So CHGS do not collect any payments. All payments go to the trustee ie. BLHB(Ban Hing Lee Bank) Trustee which is owned by CIMB Group. So BHLB Trustee handles all investors funds.

Sure you can use my reply as a consultant for CHGS, but not official for CHGS as only the board of directors can officially make a reply. However I urge you ro check with Ministry of Finance to find out the organisational structure as they are the governing body for banks and non-banks related investment.

Btw did u manage to drop by CHGS booth? Hope someone managed to answer all your questions there. We had a good response from the Bumiputra exhibition as many bumiputras find this to be a good long term investment to add to their ASN/ASB as the dividens from CHGS can be re-invested to ASN/ASB to accumulate.

Hi Non Grower,

The structure goes like this.

1. Ministry of Finance
2. Under Ministry of Finance, there is Bank Negara and CCM.
3. Bank Negara handles all bank related matters.
4. CCM (Companies Comission of Malaysia) /SSM (Suruhanjaya Syarikat Malaysia) handles all non-bank related matters - ie to act as agent of the Government and provide services in administering, collecting and enforcing payment of prescribed fees or any other charges under the laws administered - see http://www.ssm.com.my/en/corporate_power.php

Hope you understand. For the organisation structure of investments, you can also refer to Ministry of Finance.

The companies that were raided by CCM was because they dealt with foreign land investments which has no CCM approval. Not only that, some of them do not even have any authority to sell the land in their mother country which was in UK and Canada. They were merely using investors money to roll. Which also explains why the land is a barren agricultural land. Many investors were duped into it & it was just a matter of time that the scheme was exposed. So please be careful of land investment if there is no CCM approval. Don't get involved.

With your regards to collection of money, it is also the similar for CCM's requirement. One of the requirements for CCM for this investment is that there must be a Trustee who undertakes as a guardian for the investors. So CHGS do not collect any payments. All payments go to the trustee ie. BLHB(Ban Hing Lee Bank) Trustee which is owned by CIMB Group. So BHLB Trustee handles all investors funds.

Sure you can use my reply as a consultant for CHGS, but not official for CHGS as only the board of directors can officially make a reply. However I urge you ro check with Ministry of Finance to find out the organisational structure as they are the governing body for banks and non-banks related investment.

Btw did u manage to drop by CHGS booth? Hope someone managed to answer all your questions there. We had a good response from the Bumiputra exhibition as many bumiputras find this to be a good long term investment to add to their ASN/ASB as the dividens from CHGS can be re-invested to ASN/ASB to accumulate.