http://www.thestar.com.my/Business/Busines...ry-heights.aspx

Country Heights Grower Scheme investors receives RM208m

Published: Tuesday August 6, 2013 MYT 10:23:00 AM
Updated: Tuesday August 6, 2013 MYT 10:38:58 AM
Country Heights Grower Scheme investors receives RM208m

BY CHOONG EN HAN

KUALA LUMPUR: The management company of Country Heights Grower Scheme (CHGS), Plentiful Gold-Class Bhd has handed over RM208mil to the trustees of the now defunct scheme.

The monies comprise of three payments including 90% capital refund of RM182.9mil, RM25mil goodwill payment from scheme founder Tan Sri Lee Kim Yew and 10% refund payment amounting to RM200,750 unclaimed money by some growers.

“This puts growers at the receiving end of a total payout of RM319mil as opposed to RM189.5mil raised by the scheme,” said Lee at a press conference on Tuesday.

The company said this is in compliance with the voluntary termination as approved by 98.89% of the participants of the scheme.

The trustees are now tasked to refund the monies to some 10,000 growers in the scheme.

CHGS was Malaysia's first oil palm farm-sharing scheme that provided the opportunity to the subscribers to participate in the palm oil industry in Malaysia.

Plentiful Gold-Class in the last five years had paid a total return of 48%, consisting of a rate of return of 8% per annum for the first three years and 12% over the subsequent two years.

It paid a total net yield of RM78.5mil for the period between 2007 and 2011.

With the additional RM25mil goodwill payment together with the full refund of the grower's fee pursuant to the termination of the scheme, the growers are set to collectively receive a total of RM319mil.

This is compared to the total funds raised at RM215.5mil when the scheme was first launched in 2007.

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Dear all,

Now that you all are starting to receive your checks, I would like to introduce Golden Agro Growers Scheme to you all.

The Golden Agro Growers Scheme is a 20 year investment scheme.

For the first 5 years of the scheme(the planting phase), investors will receive a 7% guaranteed return.

From year 6 to year 20 of the scheme (the harvesting phase), investors will receive 100% of the net profits of the plantation, minus a 5% management fee. The projected returns are 7 to 23%, depending on CPO prices.

After year 20, the plantation will be sold, and investors will receive capital appreciation as well on the land sold.

Unlike CGHS, we argue that Golden Agro Growers Scheme is a realistic investment. By not promising a fixed return during the harvesting phase, the company will not face the issue where it cannot deliver what it is promising.

Of course, it is in the company's best interest that the plantation does well. However, we are aware that we cannot foresee what will happen 5, 10 years down the line. Minimum wages might increase, leading to higher labour costs. Fertilizer prices (the largest expenditure of a plantation) might go up too. Nonetheless, we are committed to making our plantation a success.

Feel free to browse the website - www.gapgrowers.com.my

Thanks

This post has been edited by suewong85: Dec 23 2013, 09:50 AM

1 - the return is of course tied to the production yield. the profit generated is then proportional to the CPO prices.

2- if someone promise a fixed return, of course it would be easy to sell. but when the time comes to actually pay, that person might not be able to, and end up closing their scheme. in that case, is it really good for you all? or is it good for them? we do not want to promise anything. the 7-23% is projected returns, but of course, there are risks in everything. even if you put your money in a plantation company, there is no guarantee that you will get a good return too. in our case, we want to have the same risk and rewards as our investors. if you are looking for some 20+ year, 10+% guaranteed product, then this is not for you. nonetheless, if you can find one product like that, please let me know too.

3- no one wants their plantation or business to fail. the company has good plantation managers, independent auditors, independent plantation consultants, etc. furthermore, if you want, investors are more than welcome tisit the plantation yourself. Can you say the same if you invest in a listed company? Do you think you can go and visit IOI's plantations?


This post has been edited by suewong85: Dec 23 2013, 09:56 AM

Plantation companies have been paying out a dividend yield of 3 to 7% or so p.a. on average the past few years, even during the good times when CPO prices hit RM 4000+. Listed companies do not pay out 100% of their net profits. Normally it is around 30% or less.

For 2012, the average dividend yield was 0.3% to 3.5%. You can check these information yourself - http://www.theedgemalaysia.com/insider-asi...r-catalyst.html

Also, can you say for sure 100% that you will get capital appreciation from your stocks? Everything has risks. Listed companies have crashed before. Unit trusts have went bust.

This post has been edited by suewong85: Sep 10 2013, 09:15 PM

of course there are risks. that is why we do not dare to guarantee a fixed return, because things change.

fertilizer prices generally follow CPO prices. they go up when CPO prices go up, and down when CPO prices go down.

FFB prices are fixed, and are published daily. I dont know how you got that impression that of selling above industry price.

expected FFB? well, this question also ties into your question about peat. Peat costs a bit more to develop, but consequently, have a higher yield peer hectare too. You can plant about 128 trees per hectare on mineral soil, but about 155on peat. The company is looking to get about 24 mt/hectare, and that is what the projections are based on.

There has been many development in peat in the past few years. It's all about water management and compaction when it comes to peat. There are both pros and cons in both mineral soil and peat. Mineral is also very hilly and uneven, making harvesting harder. Peat is flat.

See some articles about peat :
http://www.theborneopost.com/2013/09/08/ne...e-for-oil-palm/
http://www.theborneopost.com/2013/09/08/pe...asteland-lulie/
http://www.theborneopost.com/2013/09/08/pr...-critics-wrong/

expected cost? in general, a decent scaled plantation companies breaks even at about RM 1400 to RM 1500. The company expects to fall within that range too, and will of course strive to get lower.

re: growing the company / cost per acre/hectare, i think that you are comparing apples to oranges. our business model is structured differently, and our aims are different too. investing in IOI / KLK will not give you higher dividends, and again, there is no guarantee that the share prices will go up.

In our case, after 20 years, the land of the plantation will be sold. Do you not think that land prices will appreciate in 20 years?

as for the cost per acre/hectare - that again is a simplistic argument. At the end of the day, for both companies, you do not own the land. You will just profit form the company using the land. in fact, we even go one step further and are more than happy to invite investors to visit our plantations. can you visit IOI / KLK plantations?

also, our "price per acre", to use your metrics, is "inflated" largely because of how our product is structured.

This post has been edited by suewong85: Dec 23 2013, 09:59 AM

well, the boss is a very low profile individual. as for his track record, feel free to research into Sunrise Berhad, during the period when he and his business partner Dato' Tong bought over the company.

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&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

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

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