This article first appeared in The Edge Malaysia Weekly on November 21, 2022 - November 27, 2022

JOHOR-based oil palm planter and property developer Harn Len Corp Bhd is seeking strategic partners to help it venture into other agriculture or aquaculture businesses with faster cycles.

Harn Len chief operating officer (COO) Kelvin Low Yew Yern says the group intends to plant new cash crops or develop other products by precision farming with big data.

“The areas that we are looking at include pineapple and aquafarming. After the Russia-Ukraine war and the Covid-19 pandemic, we realise that food security is becoming a big issue. We want to diversify our revenue streams, rather than just relying on palm oil,” he tells The Edge in an interview.

According to him, Harn Len will identify new cash crops and aquaculture that can contribute to its profitability. The group also plans to divest loss-making assets.

“We seek to monetise our shophouses, industrial factories and leasehold properties where opportunities arise to enhance our cash flow position,” Low says.

Harn Len’s 2021 annual report shows that the group owns a 25-storey corporate and business office-cum-hotel building dubbed Johor Tower, six double-storey terrace shophouses, as well as three factory building-cum-offices in Johor Baru. It also owns an acre of land in the central business district (CBD), across from Coronation Square.

In addition, the company owns a seven-storey office-cum-residential building dubbed Wisma Harn Len in Kuching.

Low estimates that Harn Len’s non-core assets and properties are worth more than RM100 million.

“We believe Harn Len will perform better, financially, with the implementation of our corporate strategies. We will continue to build on our core businesses and divest non-performing businesses. Our main focus is to strengthen our plantation business with additional land banking,” he says.

Low, 43, is the son of Harn Len managing director Low Quek Kiong. He was the chief financial officer (CFO) of Harn Len from 2003 until he moved to his new role as COO in May this year.

Harn Len was founded by Low’s grandfather Tan Sri Low Nam Hui, who passed away in 2015. The group started as a logging firm and went on to become a plantation company.

When Harn Len was listed in July 2003 — following a reverse takeover (RTO) on Sportma Corp Bhd — it had a plantation area of 18,000 acres. Today, the group has more than 37,000 acres, while the Low family also privately owns another 5,000 acres. Their estates are mostly in Pahang and Sarawak, with no new planting since October last year.

Low says Harn Len does not have plantation land in Johor, as the late Nam Hui started his logging business in Pahang.

“We have some properties in Johor, but our property segment is not active. We are just collecting rent, and I think this division is one of the hindrances to our company,” he adds.

Since taking over Harn Len’s operations last year, Low has been making efforts to change it from a traditional family-controlled company to a professionally run, listed one.

“We have a new CFO and changed our independent directors. Our company is much younger and vibrant now. Yes, we have been a rather low-profile company over the years. But, now, we are seeking strategic partners and investors to take us to the next level,” he says.

Harn Len is about 60%-owned by the Low family. Interestingly, Ong Yoong Nyock — founder of Tiong Nam Logistics Holdings Bhd — and his brother-in-law Yong Loy Huat — major shareholder of Wong Engineering Corp Bhd — are also shareholders of Harn Len, with a collective stake of at least 5.44% as at March 31.

Harn Len’s earnings performance has been rather lumpy in recent years. From a net loss of RM58.3 million in the financial year ended Dec 31, 2019 (FY2019), the group returned to the black with a net profit of RM98.8 millioFn in FY2020, before slipping into the red again with a net loss of RM22.2 million in FY2021.

After posting losses for six straight quarters since 4QFY2020, Harn Len reported a net profit of RM4.93 million in 2QFY2022, thanks to the better average selling prices of crude palm oil (CPO) and palm kernel.

Low says Harn Len was previously in the red because of some impairment losses in Sarawak, owing to land rights issues. “We have a 6,313ha oil palm estate in Sarawak held under Harn Len Pelita Bangunan Sdn Bhd. Every time there were losses, our auditors wanted us to write down the losses. Over the past three to four years, we wrote down nearly RM30 million to RM40 million in losses.”

The shortage of labour during the Covid-19 lockdowns made things worse. As at end-December 2021, Harn Len employed 481 people, including 211 foreign workers.

Low concedes that Harn Len’s bottom line has been affected by the labour shortage issue, and it has not been able to capitalise on the higher CPO prices.

“As at Sept 30, 2022, we were still short of 329 harvesters. Although the government has approved some applications for foreign worker quotas, there are still administrative and procedural glitches that cause delay. Harn Len will continue to source foreign workers through recruitment agencies,” he says.

Fortunately, most of Harn Len’s land rights issues have been resolved and its write-offs are completed.

“If and when there are profits, or if and when we get the land titles, our auditors will allow write-backs. Definitely, the worst is over. We are already seeing good results; hopefully, they will get better in the coming quarters and years,” says Low.

He discloses that the 5,000-acre land that is currently owned by his family might be injected into Harn Len, provided the company can secure its land title. “Without the title, this land is not viable for Harn Len.”

Starting from scratch in 2003, Harn Len’s oil palm age profile is between six and 20 years old.

“We had a lot of difficulties when we first started. We were stuck in Sarawak in the first five to six years. We bought the land, but we could not plant. We then learnt how to develop a relationship with the natives, and we understand their culture. We started to employ a local team, instead of sending our staff from Johor every month. Today, we are one of the very few Peninsula [Malaysia] companies that do well in Sarawak,” says Low.

Shares in Harn Len had gained more than 162% year to date to close at RM1.86 last Wednesday, giving it a market capitalisation of RM395.27 million. It hit an all-time high of RM1.96 on Oct 20.

Notably, the group had in October proposed an eight-for-five bonus issue, which is expected to be completed by 4QFY2022.

“We believe the increase in our share price is driven by the rising CPO price and is in line with other plantation stocks. We are considering implementing a dividend policy in the near future,” he says.