10/03/2009 (The Star Online), Muar - Integrated poultry company Leong Hup Holdings Bhd is venturing into oil palm cultivation to diversify its earning base.

Executive director Tan Sri Francis Lau Tuang Nguang said the diversification would offer an additional stream of potential revenue for the group in the future and reduce its dependency on the company’s existing core business of poultry farming and breeding, processing and marketing of chicken and related products.

“Prospects in the oil palm industry remain positive and we are looking at the venture as our long-term investment portfolio,’’ Lau told StarBiz after the company’s EGM.

At the EGM, shareholders approved the proposed acquisition of 1,226,753 shares in Alam Muhibah Sdn Bhd (AMSB) by Leong Hup for RM33.90mil cash, representing 35% of the enlarged share capital of AMSB.

Shareholders also approved the proposed five-year call option to Leong Hup to acquire up to 744,813 AMSB shares representing approximately 21.25% of the enlarged share capital of AMSB.

He said the acquisition of 1,226,753 shares in AMSB would be completed by year-end and the five-year call option would increase Leong Hup’s equity in AMSB to 56.25%.

“The enlargement of our shares in AMSB will enable us to consolidate the earnings of the company and exercise further control over it,” Lau said, adding that with its involvement in AMSB, the company would continue to seek more opportunities in the oil palm cultivation businesses in the future.

AMSB’s plantation land is located in Kampung Baru Star in Gua Musang, Kelantan, within an area designated for agriculture use especially for oil palm plantations.

About 957.51ha of the total 4,085.30ha is planted with oil palm aged from one to 18 months which will be maturing in two to three years.

“The entire plantation land will be fully planted with oil palm within three years,’’ said Lau.

He said the company did not see its involvement in oil palm cultivation as unfavourable with the prices of the crude palm oil (CPO) and fresh fruit bunches (FFB) declining over the second half of 2008 after reaching their peak in March 2008.

Lau said CPO and FFB prices had begun to rise since the beginning of 2009 and the outlook for the palm oil industry was expected to be favourable.

However, he said, the oil palm segment would not overtake its existing poultry-related business as the latter would continue to contribute about 80% to its total earning.