20/06/2011 (The Star) - Quick to act when the right opportunities come along, is pretty much how Tradewinds (M) Bhd is now involved in the three main staples of the country and these seem to be bearing fruit under the rising commodity prices environment.

Associated with the elusive tycoon, Tan Sri Syed Mokhtar Albukhary, Tradewinds with its sugar, oil palm and rice businesses has come under constant investor and media attention due to its growth strategies, some of which have piqued much curiousity.

The group's oil palm plantation operations via Tradewinds Plantation Bhd manages over 41,000ha in Peninsula Malaysia and almost 86,000ha in Sabah and Sarawak. Some 65% of this landbank is planted with oil palm.

A note by MIDF Research in March following a company visit says young trees and immature areas account for almost 43% of its total planted areas, which will sustain “Tradewinds' earnings growth as the trees gradually reach maturity.”

For sugar, the group operates two sugar refineries with a combined capacity of 2,300 tonnes per day.

Its latest jewel is rice, through the acquisition of a 72.6% stake in Padiberas Nasional Bhd (Bernas) for a whopping RM710mil. The acquisition was completed early last year.

According to its chairman, Datuk Wira Syed Abdul Jabbar Syed Hassan, the company realises that organic growth alone is insufficient to meet its vision of being the preferred globally competitive integrated agribusiness organisation.

“Thus, when an opportunity to acquire a controlling stake in Bernas presented itself, we quickly recognised the potential it has in terms of expansion in line with our vision,” he said in Tradewinds' 2010 annual report.

Previously, Tradewinds merged its plantation business with that of Johore Tenggara Oil Palm Bhd in 2006. The merger involved 14 of Tradewinds' plantation assets.

This resulted in the listing status of Johore Tenggara being taken over by Tradewinds Plantations Bhd, as Tradewinds holds a 69.76% stake.

Tradewinds also acquired Gula Padang Terap Sdn Bhd for RM188mil from Jalinan Semangat Sdn Bhd, Perbadanan Kemajuan Negeri Kedah and PPB Group Bhd, in late 2006. Last month, the Dosmetic Trade, Co-operatives and Consumerism Ministry raised the sugar retail price to RM2.30 a kg from RM2.10 a kg.

Last year, total production of refined sugar in Malaysia was 1.66 million tonnes, of which soon-to-be listed MSM Malaysia Holdings Bhd and Kilang Gula Felda Perlis Sdn Bhd have a combined 57% market share. Predictably, the other player is Tradewinds.

On palm oil, experts say that crude palm oil (CPO) prices will remain firm, hovering between RM3,400 and RM3,480 per tonne this year. As of June 15, CPO futures prices on Bursa Malaysia Derivatives June contract gained RM17 to close at RM3,278 per tonne and July 2011 contract increased by RM25 to close at RM3,284. Meanwhile, August contract rose RM15 to close at RM3,268 and September saw an increase of RM22 to close at RM3,270.

As for rice, the staple food of Malaysia, Bernas recently made headlines when it received a letter from the public-private partnership unit under the Prime Minister's Department on the extension of the Bernas Agreement.

This translates into a monopoly for Bernas over the country's rice imports for a period of ten years. The extension is from Jan 11, 2011 to Jan 10, 2021.

Climate change, higher world oil prices and a growing global population are factors that are affecting food sources and their prices. Along with higher oil prices, there has also been an increase in rice prices since the third quarter of 2010. Analysts expect the average rice prices to increase in 2011 and rice imports are likely to pick up in view of weaker harvests following flooding in key rice-producing regions.

The Government has also mentioned that it is closely monitoring the nation's food stockpile to ensure there are adequate sources in light of a looming global food crisis.

All these developments have positively contributed to the stellar performance of Tradewinds in terms of its financial performance.

In the previous financial year that ended Dec 31, Tradewinds net profit doubled to RM482.1mil from RM241mil in 2009. This is achieved on the back of an RM5.6bil revenue against RM2.1bil in 2009.

According to Tradewinds, for the financial year under review, all three main divisions of the group namely rice, sugar and plantation, has contributed to the favourable increase in revenue as compared with the corresponding period last year.

The rising appeal of Tradewinds has not gone unnoticed by investors. Its share price has risen by 29% since May 12 to close at RM10.50 on Thursday.