Tuesday, April 15, 2008

Palm Oil Investment: Country Heights Grower Scheme

Nowadays, palm oil industry is one of the fastest and most promising sector in Malaysia. Why? Positive demand in bio-diesel and the increase of world demand of palm oil especially from China, United of States of America, India and Europe.

How can you invest in this sector? Buy Sime Darby, IOI and KLK share in KL stock exchange? As I mentioned in previous post, I will only consider investment with risk-adjusted return higher than 8%. Directly investing in stock at this point (KLCI=1250) doesn't sound like a attractive entry point for me - unless it fall to 1100 or even lower.

Now, there is an investment scheme from Country Heights - "Country Heights Grower Scheme" (CHGS). This scheme is Malaysia's 1st Oil Palm plantation investment scheme combining farm estate and investment that provides the opportunity to the investor to participate in palm oil boom in Malaysia. Under this scheme, investor will "buy" a plot (a plot has 1/4 acre of land) from the company and that enjoy following benefit:

  1. 1st to 3rd year: Guarantee 8% income. Financial year ended December. Payout in next February.

  2. 4th year to 23th: Return based on (a) CPO market price and (b) Yield for the plantation.

    • (a) if average CPO price for the year is above RM2100, you will get a 12% payout. The percentage will reduced ~1% per Rm100 lower. If average CPO is lower than Rm800, you will get 0%.

    • (b) If the Metric Tan/Hectare is between 20-24.99, you get extra 1%; 25-29.99 get extra 2%; >30 get extra 5% on top of your dividend from CPO price

    • Thus the potential return is 17% while the risk is getting 0% when the average price is slump to below RM800.

    • After 23rd year: the land will be sold and investor can enjoy the capital appreciation.

    • For those not familiar with CPO, CPO stands for Crude Palm Oil. The latest CPO price is RM3600. And it already dramatically corrected from around RM4500 since past few months. I am ready to see if it will further down to RM2500 or so. I believe the market will able to get support on RM2100 (return=12%), or if worse in RM1700 (return=8%, my benchmark). Remember: this is just average price - If it starts the year with Rm2400 and continue falling toward Rm1000 gradually until end of year, yet we still get an average of Rm1700, which translated into 8% return to the investment. Sound good, isn't? Furthermore, the scheme will only entering 4th year phase by year 2010. (first 3 years get flat 8%), I believe once US market get back to stable, China started and completed it correction; the palm oil will have much better and stable prospect. Remember, it is a long-term investment.
      A plot was sold RM5000 at the launch in year 2007. Readjusted to RM5500 in year 2008. I been told that starting from 1st April 2008, it will be adjusted to RM6000. I bought in RM5500 price range last March.
      By the way, myself isn't an agent for this scheme. I can refer you to my agent if you interest - please drop me a comment and visit http://www.chgs.com.my/ for more detail.
      See latest CPO prices: http://www.palmoil.com/index.php?q=D1VTWls=