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Hap Seng consolidated remains optimistic on plantation business

Last update: 30/05/2019
KUALA LUMPUR, May 30 (Bernama) -- Hap Seng Consolidated Bhd remains positive on its plantation business despite lower crude palm oil (CPO) price expectations of between RM2,000 and RM2,300 per tonne this year.

Group managing director Datuk Edward Lee Ming Foo said the company felt the impact of the declining CPO prices since last year.

“(But) the CPO future is still good, if you look at the world’s population growth and demand for (edible) oils, palm oil is one of the most competitive oils.

“And it is the matter of riding through the down cycle,” he told a press conference after the company’s annual general meeting here, today.

However, Lee said for every RM100 increase in the CPO price, the company would gain about RM15 million in earnings.

On the property division, Lee said Hap Seng was at the initial planning stage of building a hotel near the Malaysia International Trade and Exhibition Centre (MITEC), as no hotels were available in the area at the moment.

The hotel near MITEC will be the company's second hotel venture after Hyatt Centric Kota Kinabalu in Sabah, with a gross development cost of RM275 million, slated for opening in the third quarter of 2021.

"When we launched our first hotel development in Kota Kinabalu a few months ago, we saw demand for hotels was very good with the influx of Chinese tourists. So, we are planning to build another hotel in Kuala Lumpur. Currently, we are at the initial stage of planning," he said.

For this year, Lee said the company would focus on its existing land bank of 977.72 hectares (2,416 acres) instead of acquiring more land.

Group finance director James Lee Wee Yong said currently, the company's gross development value under planning for the next seven to eight years stood at RM6.5 billion, while unbilled sales was about RM800 million for its property segment in Sabah and the Klang Valley.

On its building materials division, Lee said the company would work together with some of its Chinese partners to improve the production and manufacturing process of its the ceramic tiles under the MML brand name.

"We have identified the Chinese partners, and we are in the midst of finalising the terms of the collaboration. Hopefully, the collaboration agreement could be completed by year-end," he said.

The building materials division swung into operating loss of RM135.5 million in the financial year ended Dec 31, 2018 (FY18) from an operating profit of RM157.4 million in FY17.

Overall, Lee expected the company's outlook to remain stable moving forward, with the credit financing division continuing to contribute the highest profit growth to the group, due to higher demand for credit.

In FY18, credit financing division saw its operating profit increased 49 per cent year-on-year (y-o-y) to RM246.9 million from RM166.1 million in FY17, the strongest among the six businesses the company is involved in.

For property division, the operating profit increased 21 per cent y-o-y to RM648.9 million in FY18, while trading division's operating profit rose 22.65 per cent y-o-y to RM53.6 million from RM43.7 million in FY17,

The plantation division's operating profit decreased 74.7 per cent y-o-y to RM37.2 million in FY18 and the automotive division saw a lower operating profit of RM19.0 million from RM27.3 million in FY17.


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