Monday, July 29, 2002 (The Star) - KUMPULAN Guthrie Bhd is set to offergood growth potential in the long term with the ability to cash in onfirmer crude palm oil (CPO) prices, said plantation analysts.They are upbeat on the plantation giant and expect positive contributionsfrom its vast oil palm plantations in Indonesia, Minamas and GuthriePecconina, to the group’s total palm oil output.The Indonesian venture is targeted to increase the group’s total CPOoutput by more than threefold to one million tonnes in 2004 from 500,000tonnes registered last year.Kumpulan Guthrie, in its recent analysts’ briefing, said plantationsoperations were projected to show higher contributions as the Minamasplantation acquired last year had begun to yield fruit and overallefficiency of the plantations had continued to improve.The Pecconina plantation’s mature hectarage is projected to expand from7,697ha this year to 14,046ha by end of 2004.Meanwhile, Minamas has 71% or 199,667ha of matured estates, out of which69% of the total matured areas are at a prime production cycle with anaverage age of four to eight years.Analysts also said growth for Indonesia’s CPO output would exceed that ofthe Malaysian plantations.The rising yield should drive the fresh fruit bunch (FFB) output from theIndonesia plantations at a faster average growth rate of 790,000 tonnesper year compared to 50,000 tonnes per year for the Malaysianplantations.The contribution from Indonesia is projected to raise Kumpulan Guthrie’sFFB output to 4.9 million tonnes in 2004 from 2.4 million tonnes lastyear.Expressing confidence over Kumpulan Guthrie’s investment in Indonesia, itsgroup chief executive officer Tan Sri Abdul Khalid Ibrahim said capitalinvestment in the Minamas plantation was estimated to be RM240mil over thenext two years.He said the group planned to construct another five mills in Indonesia toboost total mill processing capacity to 896 tonnes per hour in 2005 from405 tonnes per hour currently.The total budget for the mills is estimated to be RM80mil this year andRM83mil next year. The group has also budgeted to spend RM60mil andRM18mil respectively over the next two years on the construction ofworkers’ quarters and mechanisation in the plantations.Apart from its Indonesian venture, the group expects its Guthrie CorridorExpressway (GCE) to provide infrastructure access to its landbank in thevicinity.The main rationale of the 25km two-way toll GCE is to provideinfrastructure access to Guthrie’s landbank of 11,650 acres from Shah Alamto Kuang.OCBC Securities plantation analyst said: “The GCE will shorten thecommuting time from the Klang Valley to Guthrie’s five communities in thearea from almost 40 minutes currently to less than eight minutes. This isexpected to at least double the value of the landbank to about RM1 per sqft.”The analyst added: “Should the land value increase by RM1 per sq ft,Guthrie will recover its RM589mil investment cost in GCE as every senincrease in land value will raise group pre-tax profit by RM5.1mil or 1.2%of our projected pre-tax profit of RM432.3mil for financial year 2003.”The expressway, which is scheduled for completion by end-September nextyear, is currently 15.2% completed.However, analysts expect the group’s future property launches to be slow.Since September last year, Guthrie has sold 2,273 units of the total 2,972units of property launched at its three core township developments, namelyBukit Jelutong, Bukit Subang and Sungai Kapar Indah.Total locked-in sales for January to June this year amounted toRM270.7mil. In the coming years, another 6,000 acres have been earmarkedfor development, but progress is expected to be slow and the group’s focusshould remain on high-end products, the analyst said.Meanwhile, Mayban Securities in its report also saw good long-termprospects for Kumpulan Guthrie but questioned its short-term outlook dueto high borrowings and capex for its Indonesian investments.The research unit said productivity benefits from mechanisation would takeanother one to two years to offset the lumpy investment in machinery, flatmanufacturing sales as well as tentative progress in its Indonesiainvestments.However, Kumpulan Guthrie in its analysts’ briefing had said the group wastargeting to reduce its borrowings by 17% to RM2.39bil and improve itsgearing to 0.84 times for financial year 2004 from 1.19 times as at endMarch 2002.