HUGE PRODUCTION: SOP continues to provide the best growth by possesing one of the most favourable tree-age profiles.

13/12/2011 (Borneo Post) - Institutional investors remain confident about Sarawak Oil Palms Bhd (SOP) production growth prospects and downstream expansion in the state.

In its recent meeting with the group’s management, OSK Research Sdn Bhd (OSK Research) stated that SOP remained favourable among companies in its plantation universe that has continued to provide the best growth against valuation tradeoff by possessing one of the most favourable tree-age profiles.

However, Gan Jian Bo from OSK Research highlighted that most investors were worried that SOP potentially diversifying its business into an area where it currently lacked expertise and could begin to lose its focus.

“Investors were not sure about SOP’s plans for its property venture since there were not much details disclosed in regards to the purpose of the joint venture between SOP and Land Custody and Development Authority (Pelita),” he said.

Adding further, Gan noted that SOP had 5,000 hectares of planted area that was 0.5 kilometres away from an established housing estate near the core of Miri.

“Management clarified that the venture is largely in anticipation that once these trees are due for replanting over the next five to six years, SOP will then have the added option of converting the plot of land property development instead,” said Gan.

The research firm stated that SOP’s maiden venture downstream of a 1,500-tonne per day refinery and 500-tonne per day kernel crushing plant were recorded to commence operations in the second quarter of 2012.

SOP’s refinery which was located in Bintulu Port would be the fourth in the deep sea port and the fifth in the state. Its internal crude palm oil (CPO) production would cater for approximately 70 per cent of the refinery’s capacity in first year of operation and likely to exceed capacity in three years’ time.

Sarawak was facing capacity shortages, so the refinery should be well-utilised while there was an oversupply of refining capacity in the Peninsular.

Only 23 per cent of SOP’s trees were above 10-year-old which the production from 77 per cent of its trees would continue to rise as they matured.

In order to achieve yields on peat soil that are comparable to and in cases superior to those of mineral soil, SOP employed proper water and pest management, along with higher initial tree density.