THE FUTURE IS BRIGHT FOR MKHOP

MKH Oil Palm (East Kalimantan) Bhd is poised to capitalise on the spillover effects emanating from the new Indonesian capital, Nusantara – aligning with the company’s expansion strategy through its upcoming Main Market listing.

Last November, MKH Bhd which is listed under the property sector on Bursa Malaysia obtained approval from its shareholders to list its subsidiary MKH Oil Palm (East Kalimantan) Bhd (MKHOP). The listing would unlock value for MKH group’s plantation business.

MKHOP group has a cash reserve of RM88mil as at Dec 31, 2023 with zero bank gearing. With its strong cash reserve and the proceeds to be raised from the listing, MKHOP will be able to acquire more land banks for its oil palm plantation business.

The early days

MKH executive chairman Tan Sri Alex Chen Kooi Chiew first encountered an oil palm plantation in 1970. He subsequently embarked on a bold investment by purchasing a 300-acre oil palm plantation in Tanjung Sepat, Selangor.

The plantation had been poorly managed and the oil palms were not thriving. So, Chen reorganised the plantation, improved the management system and sought the assistance of experts to enhance the soil quality.

Within a year, he had successfully transformed the unproductive land into a profitable oil palm plantation. This experience left an indelible mark on him, instilling in him an enduring passion for the oil palm industry.

In 2008, an extraordinary opportunity beckoned. MKHOP ventured into oil palm plantations in East Kalimantan.

With Chen’s strong determination and planning, as well as exemplary teamwork, MKHOP fully planted the land in just three and a half years. The 18,200ha land was developed into a productive, high-yield oil palm plantation.

Today, the MKHOP plantation enjoys a high fresh fruit brunch (FFB) yield of between 26 and 28 metric tonnes per hectare per year. The oil palms have a favourable age profile, with 92.7% in prime mature stage.

The plantation is located along the equator with adequate levels of rainfall and sunshine. The terrain is generally flat to gently undulating with the whole land below 50m above mean sea level. This makes the operation – including planting, upkeep and maintenance, harvesting and evacuation of FFB – easier.

The assets supporting MKHOP’s operations include oil palm plantation of about 18,200ha, a crude palm oil (CPO) mill capable of processing 90 metric tonnes of FFB per hour, a CPO bulking station with a jetty, and a palm kernel crushing facility with a capacity of 90 metric tonnes per day that is currently under construction.

Throughout its journey, MKHOP has taken a holistic approach to its development, focusing on the enhancement of facilities, capacity building, quality control management and adherence to environmental, social and governance (ESG) principles.

These proactive measures serve as the foundation for sustainable growth and ensure that the company remains steadfast on its path of progress.

The achievements of MKHOP were made possible through exemplary teamwork and the invaluable contributions of the management team.

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Tech and mechanisation

MKHOP has invested significant time and capital in the research and development of its mobile app called the RondaApp, which is equipped with primary functions such as real-time management of the plantation area, recording the growth status of oil palms and updating the status of FFB collection and transport.

The company introduced mechanisation to improve productivity at the plantation. From power wheelbarrows and gradually progressing to crawler dumpers, agricultural all-terrain vehicles (ATVs) and utility task vehicles (UTVs), these advancements have significantly reduced the time taken to harvest and transport the FFB to the mill.

By promoting mechanisation, the company has made improvements in optimising the productivity and efficiency of FFB collection, milling performance, extraction rates and operational costs.

Apart from that, the company has put in place an integrated drainage system and an amphibious long arm excavator for water management purposes.

During the wet season, the system assists in discharging excessive rain water through canals and drains – thus minimising the risk of floods.

In the dry season, the system assists in storing rain water to maintain the moisture level of the soil.

Sustainable growth

> Talent pool development: MKHOP firmly believes that sustainable business growth relies on a people-centric approach.

More than a decade ago, the company initiated the “good agricultural practices” vocational training programme, with the aim of nurturing a young managerial workforce capable of holistic development in agriculture, financial management and leadership skills.

The average age of these young talents is 35 years, with about 90% holding a bachelor’s degree in fields such as agriculture, finance and business.

Upon completion of their training, they are deployed to the company’s existing and future oil palm plantations to prepare for future expansion.

> Palm kernel oil mill: To further diversify the company’s sources of revenue, it is in the process of constructing an oil palm kernel crushing plant with a daily capacity of 90 metric tons, producing crude palm kernel oil (CPKO) and palm kernel expeller (PKE).

The new facility is expected to commence operations in April 2024, bringing in a new revenue stream for the company through the sale of CPKO.

Additionally, with the production of PKE, it aims to supply high-quality animal feed to downstream processing industries.

> ESG compliance: To produce sustainable palm oil, MKHOP is committed to preserving a healthy ecosystem at its plantations through good estate management practices.

These practices include zero-burning during land clearing and the installation of various signboards promoting environmental preservation and wildlife protection. These serve as constant reminders to plantation workers as they carry out their daily duties.

Its approach to sustainable plantation practices ensures that all aspects of environmental health, economic profitability and social responsibility are taken into consideration in achieving the objective of providing a strong foundation for its ISPO certification and wider market acceptance.

> CSR: MKHOP delivered 100,000 face masks to the local government and the people when the Covid-19 pandemic broke out in early 2020.

Under such extreme circumstances, the company spared no effort in securing 100,000 face masks from China and shipped them to the district of Kutai Kartanegara in East Kalimantan for distribution to the locals. The local government and the people were very grateful to the company for extending a helping hand in these times of adversity.

> Good governance: The company has put in place an excellent internal audit system. It has an internal audit team responsible for supervising the standard operating procedures for planting, fertilisation and harvesting in the oil palm plantation, as well as fruit quality control and cost management. Its internal audit team continuously improves production efficiency and provides valuable information on the overall performance of the company to the management and investors.

Golden opportunities

The relocation of the capital city of Indonesia to Nusantara in East Kalimantan unfurls an unparalleled canvas of investment and business prospects throughout the region.

The expansive land area of about 250,000ha in Nusantara constitutes a superhub that encompasses Nusantara, Samarinda, and Balikpapan in East Kalimantan.

Functioning as the hub for Indonesia’s central government and key economic clusters, Nusantara is poised to catapult Indonesia towards its ambitious goal of attaining developed country status by 2045.

The new capital is set to be inaugurated in August 2024. It is expected to house a population of about 300,000 this year, including civil servants and their families.

The relocation of capital will pave the way for greater development in East Kalimantan, promoting high-value economic activities.

Situated strategically in the geographical vicinity, within a 100km radius of the Nusantara superhub, MKHOP’s plantation is positioned to capitalise on the new capital city’s development that will contribute to the value of plantation land – bringing forth more development opportunities and economic benefits.

In addition to its existing 18,200-hectare plantation, MKHOP is proactively securing additional land within a 100km radius of Nusantara for future plantation projects, ensuring continuous growth and prosperity of the company.

MKHOP has been operating the oil palm plantation in East Kalimantan for more than 15 years. The company has accumulated extensive experience in the oil palm industry and fostered good relationships with local governments.

In May 2023, MKHOP was invited by the Indonesian government to visit the site of Nusantara.

During the visit, Chen met with Indonesia’s Minister of Maritime Affairs and Investment Coordination Luhut Binsar Pandjaitan, Minister of Public Works and Public Housing Basuki Hadimuljono and Nusantara National Capital Authority chairman Bambang Susantono to discuss investment opportunities offered by Nusantara.

With the insights gained from the visit and meetings with the ministers, MKHOP is optimistic about the future development of Nusantara and is set to embrace the potential spillover effects.