02/12/2007 (New Straits Times) - A SURGE in palm oil prices has induced local plantation companies to scramble to buy up agriculture land, fearing that it might cost them too much in the future.

Palm oil prices are predicted to remain strong next year, analysts say.

"It is better to buy land now than later because land is finite, it can never grow. Therefore land prices can only go up," said Kenanga Investment Bank analyst Yin Shao Yang.

"As for palm oil, it is a renewable commodity. Its price fluctuates based on the demand for competing vegetable oils," he added.

TA Investment Bank analyst James Ratnam concurs. "While the going is good, plantation companies might as well build on their landbank now," he said.

In April 2006, United Plantations Bhd bought 29,600ha in Kalimantan. A year later, it bought another 10,400ha, boosting the landbank in Indonesia to 40,000ha and spending US$13.6 million (RM45.7 million) in total. With its 37,081ha oil palm estates in Malaysia, United Plantations' landbank has now doubled to 80,000ha.

More recently, IOI Corp Bhd spent US$92.54 million (RM310.93 million) to buy stakes in Indonesia's Harita Group and affiliates which manages 152,504ha of oil palm plantation in Kalimantan. The purchase excluded Harita Group's plasma schemes. In Malaysia, IOI Corp already owns 167,689ha.

Kulim (Malaysia) Bhd will see its landbank in Malaysia expand by 20 per cent to 37,748ha when its buy of 62.01 per cent in Sindora Bhd from Johor Corp Bhd completes next year.

Miri-based Glenealy Plantations (Malaya) Bhd is doubling its landbank to 65,000ha after it swaps land with parent company Lingui Developments Bhd and buy 15,000ha oil palm land in Kalimantan.

Newly-listed Sarawak Plantation Bhd, which now owns 30,627ha, is spending RM23.65 million to hold controlling stakes over another 12,960ha.

Another Sarawak player, Rimbunan Sawit Bhd, is expanding its 13,663ha landbank by another 6,911ha.

High palm oil prices have whetted investors' appetite in plantation companies making their debut on Bursa Malaysia. This year, the investing community saw a couple of high-profiled listings.

The enlarged Sime Darby Bhd, which is a merged entity of nine companies, is now the world's biggest publicly traded oil palm company with planted area spanning across 543,626ha.

Hap Seng Plantations raised more than RM700 million at its recent initial public offering even though its landbank is only 37,630ha.

Kulim is taking a step further as it seeks secondary listing for its 61.23 per cent unit Papua New Guinea-based New Britain Palm Oil Ltd (NBPOL) on the London Stock Exchange. NBPOL is already listed on the Port Moresby Stock Exchange.

Last week, Kulim managing director Ahamad Mohamad estimated that NBPOL is likely to raise as much as US$130 million (RM437 million) from the London listing.

The bulk of the proceeds will be used to buy up more agriculture land in Papua New Guinea to expand on an existing 33,993ha landbank there.