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This article first appeared in The Edge Financial Daily on March 20, 2019

KUALA LUMPUR: Businessman Tan Sri Lim Kang Hoo, having recently sold his 24.23% stake in PLS Plantations Bhd to Ekovest Bhd, said he is confident that the plantation group will return to profit in the financial year ending March 31, 2020 (FY20), driven by an increasing palm oil production.

“In PLS Plantations, we already have a palm oil-producing business, in its best timing whereby trees are mature. They are about six to seven years old, so that is an area where our profit may be coming from,” Lim told the press after PLS Plantations’ extraordinary general meeting (EGM) yesterday.

Shareholders at yesterday’s EGM granted approval for PLS Plantations to venture into durian plantations. The company will be buying a 70% stake in Dulai Fruits Enterprise Sdn Bhd, a downstream durian-based product exporter.

Lim said the group’s new durian plantation venture will see substantial growth. “From Dulai Fruits Enterprise, we already got RM3 million based on a profit guarantee [for FY20], so we expect that business to grow very fast. It is not concentrating at just one place; we are looking at the regional market to grow the business.

“On one hand, we will grow the downstream durian business in Dulai Fruits Enterprise. For the long term, we have the durian plantations to support the supply of the downstream business,” he added.

Ekovest’s 24.23% stake acquisition of PLS Plantations from its controlling shareholder Lim for RM76.5 million in cash raised eyebrows. It begs the question: Why would a construction outfit venture into oil palm and durian plantations?

By the same token, Lim has managed to unlock his investment value in PLS Plantations. After the stake sale, Lim will be deemed interest [in PLS Plantations] through his 32.37% stake in Ekovest.

“Basically, if you look at my companies, Ekovest is [diversifying] into plantation, so that is the reason why we are putting two groups together. Ekovest had taken over the first block (24.23% stake); we will streamline the [plantation] business into the group,” said Lim.

Lim said the diversification is a synergistic and logical business expansion from PLS Plantations’ existing core business in forest and oil palm plantations.

“After acquiring Dulai, we aim to command a substantial market share for the export of downstream durian-based products. Now, we intend to vertically expand this business by focusing on enhancing the durian plantations for upstream capabilities to meet growing demand for durians, which has consistently outstripped supply.

“We intend to go into large-scale and systematic plantations for this expansion. We are also in discussions with strategic investors who can co-invest with us in this durian plantation business.”

For the long term, Lim said PLS Plantations envisions that durian plantations can be Malaysia’s new revenue stream from the export segment. “To date, PLS Plantations has commenced durian plantations on a large scale, and we have planted 30,000 acres (12,140.57ha) of oil palm.”

PLS Plantations’ share price closed unchanged at 96 sen, with a market capitalisation of RM313.63 million. Ekovest fell 1.5 sen or 2.73% to 53.5 sen, valuing it at RM1.15 billion.

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