04/02/2009 (Bloomberg) -- Kuala Lumpur Kepong Bhd., Malaysia’s third-biggest palm-oil producer, may buy planted land this year to expand production, betting that the price of the tropical commodity has found a floor after a rout.

An investment of several hundred million ringgit is “possible if the deal is very attractive,” Chief Executive Officer Lee Oi Hian said today in an interview. Takeovers of plantations are likely to be “small add-ons” and won’t surpass 1 billion ringgit ($277 million), he said.

Lee joins Goldman Sachs Group Inc. in calling the bottom of the market, which collapsed amid the deepening global recession after reaching a record last March. The slump has reduced the asking price of planted land for potential buyers like Kuala Lumpur Kepong and larger rivals IOI Corp. and Sime Darby Bhd.

Lee said he’s “cautious” about buying bare land that would need to be sown, and will continue with the company’s replanting program. Kuala Lumpur Kepong owns more than 360,000 acres (146,000 hectares) of land in Peninsular Malaysia, in eastern Malaysia on the island of Borneo, and in Indonesia.

Palm oil for April rose as much as 2.4 percent to 1,830 ringgit a metric ton and traded at that level at 12:30 p.m. in Malaysia, the second-largest producer of the oil after Indonesia. Prices have climbed for three consecutive months.

‘Bullish’ Forecast

KL Kepong, as the Ipoh-based company is known, is “bullish” on the price prospects for palm oil, based on supply and demand, Lee said. The product, used in foods and fuels, is cheaper than soybean oil, its main rival, and estate companies are in a seasonal “low-crop” period, capping supply, he said.

“I don’t see it going very far below 1,800” ringgit a ton, he said. “This type of level should be able to hold. How high it will go, I don’t know.”

Profit at KL Kepong in the year ended September 2008 climbed to 1.04 billion ringgit from 694.2 million ringgit, after the price of palm oil surged. The company said in November it expects earnings to fall this year.

Still, falling prices of fertilizer, which is about 40 percent of KL Kepong’s production costs, are helping, Lee said. The best planters in Malaysia should be able to make a ton of palm oil for less than 1,000 ringgit, he said.

“Lower fertilizer prices can help us,” he said.

KL Kepong gained as much as 0.5 percent to 10 ringgit, and traded at that level at the 12:30 p.m. break. The shares have slumped 44 percent over the past year compared with the 38 percent decline in the Kuala Lumpur Composite Index.