26/04/2010 (The Edge Malaysia), Kuala Lumpur - UNITED MALACCA BHD is expected to maintain its level of dividend payouts over the next few years, said its CEO Dr Leong Tat Thim.

The mid-sized oil palm planter had been paying 50% to 60% of its net profit in dividend in the past five years, he said in an email reply to The Edge Financial Daily.

In respect of the financial year ended April 30, 2009 (FY09), United Malacca had declared dividends totalling RM40.2 million, comprising an interim dividend of 7.5 sen net per share and a final dividend of 22.5 sen net per share. United Malacca, which closed at RM8 last Friday, posted a net profit of RM71.34 million in FY09.

The group had paid dividends of RM55.14 million in respect of FY08 on the back of RM96.57 million net profit. It also paid RM24.45 million in respect of FY07 on net profit of RM51.9 million. In respect of FY06, it distributed RM12.54 million on net profit of RM24.09 million, and RM8.04 million in respect of FY05 on net profit of RM35.57 million.

Leong said United Malacca was planning to set up a research unit as a means of boosting productivity in its rubber estates as well as diversifying its business.

"As United Malacca is now a medium-sized PLANTATION [] company, it makes sense to set up a research unit comprising plant breeders, researchers and agronomists to assist the estates to become more productive.

"This can be achieved through producing elite DxP planting materials through plant breeding, reduce fertiliser cost by producing our own organic fertiliser from biomass produced from the oil mills as well as planting of latex-timber clones on hilly, lateritic and drier areas in United Malacca's estates where oil palm do not grow well," he added.

According to Leong, the planting of latex-timber clones may become part of United Malacca's core business in the future, given attractive rubber prices and a growing demand for sustainable timber.

Before switching to oil palm cultivation in 1966, United Malacca started off as a small rubber planter with 460 acres (186ha) of land.

The group's landholdings have since grown to 60,000 acres in Peninsular Malaysia and Sabah, with its recent and largest acquisition to date being the purchase of adjoining land parcels in Kinabatangan, Sabah, which spans 25,000 acres, for RM240 million.

"We are always on the lookout for opportunities for suitable plantation land preferably in Sabah for better economies of scale," Leong  said, adding that the group currently has cash reserves of RM100 million.

He said population growth in China and India and acceptance of palm oil as a food product in the US has spurred demand for palm oil, while there is a growing demand for palm oil from the biodiesel sector in Europe.

"However, supply of palm oil may not meet demand in years to come. For example, Indonesia has slowed down its annual expansion rates of 988,417.47 acres to 1.23 million acres of Greenfield development to about 617,760.92 acres this year, and this is not likely to increase much higher in the years ahead. Hence, the world will be short of palm oil supply in the coming years, which means prices of palm oil will sustain at current levels and will move higher in the future," he explained.