This article first appeared in The Edge Malaysia Weekly on February 5, 2024 - February 11, 2024
INVESTORS with a keen eye would have noticed the uncanny similarities between plantation companies Chin Teck Plantations Bhd and Negri Sembilan Oil Palms Bhd (NSOP).
A look at the corporate information of the sister companies shows that they share the same majority shareholder Tiong Thye Co Sdn Bhd, identical key senior management and almost identical independent directors on the board.
Notably, Tiong Thye is majority-owned and controlled by the Goh family from Singapore. They hold 36.67% in Chin Teck and 55.13% in NSOP.
Given the similarities in the two, it will be interesting to see whether a consolidation of both plantation companies is on the cards. Furthermore, now would seem an opportune time for one, given that their share prices are far from their peak in 2022.
Last Wednesday, NSOP’s shares closed at RM3.22, down 7.18% over the period of one year, putting its market capitalisation at RM226.05 million. Chin Teck’s shares closed at RM7.46, down 7.4% over the same period and valuing the company at RM681.5 million.
Asked whether there were plans to merge the two companies, a source familiar with them says there are “none at the moment, to the best of my knowledge” .
Datuk Matthew Tee, who sits on the boards of Chin Teck and NSOP as an independent non-executive director, is also group executive director of listed construction company Bina Puri Holdings Bhd, in which his family controls a substantial stake.
Besides Tee, Ong Ya Chen is the other independent non-executive director who sits on both boards of the plantation companies.
NSOP has only two independent directors, which meets the minimum listing requirements of Bursa Malaysia, where one-third of the board members must comprise independent directors.
Chin Teck, on the other hand, has three independent non-executive directors: Tee, Ong and Gho Eng Liong. Notably, Gho sat on the board of NSOP as a non-executive independent director until last November, when he resigned after serving more than 12 years.
What is even more intriguing than the appointment of its independent directors is that Chin Teck and NSOP’s key senior management and directors are identical.
Goh Wei Lei is executive chairman and Goh Pock Ai serves as senior executive director of both plantation companies. Wei Lei and Pock Ai, who are part of the Goh family from Singapore, are major shareholders of the company through their interest in Tiong Thye.
Pock Ai is the uncle of Wei Lei. Wei Lei, Pock Ai and Wei Lei’s brother Chih Yuan are board members of both companies.
Gho Lian Chin is another board member and director at Tiong Thye and deemed an interested party, but the nature of his relationship with the Goh family has not been disclosed.
Chin Teck and NSOP also share the same chief operating officer and chief financial officer in Ng Yeen Chern and Gan Kok Tiong respectively. Meanwhile, the companies’ chief administrator is Chua Kok Siang.
In the companies’ most recent annual report — 2022 for NSOP and 2023 for Chin Teck — it was disclosed that executive directors Wei Lei and Pock Ai were remunerated a total of RM1.83 million from NSOP and RM1.75 million from Chin Teck.
Non-executive directors at NSOP were paid a total of RM928,955, according to its 2022 annual report; and those at Chin Teck were paid a total of RM683,400, according to its 2023 annual report.
Interestingly, both companies also share the same registered office address at Plaza Sentral in Kuala Lumpur and use the same share registrar and managing agent — Sin Thye Management Sdn Bhd, a joint-venture company in which its substantial shareholders have an interest.
In addition, Sin Thye has received management fees amounting to RM1.95 million from NSOP and RM3.54 million from Chin Teck, according to the annual reports.
Other related-party transactions that took place include those with Seong Thye Plantations Sdn Bhd for seedlings cultivation costs as well as the sale and purchase of oil palm produce. Marketing consultancy fees were also paid to Tat Lee Commodities Pte Ltd, a related party.
In terms of its plantations business, Chin Teck has four estates — Jemima and Sungei Sendayan Estate in Negeri Sembilan; Gua Musang Estate in Kelantan; and Keratong Estate and Fauzi-Lim Estate in Pahang — with a total Malaysian Sustainable Palm Oil (MSPO)-certified area of 13,352ha. It also has two mills that have a capacity of 70 tonnes an hour.
In addition, Chin Teck has interests in oil palm plantations in Indonesia through joint ventures.
According to its 2023 annual report, annual fresh fruit bunch (FFB) yield per hectare was 19.08 tonnes and its crude palm oil (CPO) and palm kernel (PK) extraction rate was 19.13% and 4.78% respectively.
Of its total planted area of 12,021ha, 86.16% comprises mature trees and the remaining 13.84%, immature trees. Trees in their prime, aged 11 to 15 years, made up 25.68% of the planted area while those aged six to 10 years stood at 21.8%.
Chin Teck’s net profit for the first quarter ended Nov 30, 2023, amounted to RM21.32 million, down 15.7% year on year from RM25.29 million.
In comparison, NSOP has a smaller plantation area, four estates — Ladang Senama in Negeri Sembilan; Ladang Ibam and Ladang Maran in Pahang; and Ladang Gula in Perak — and a land bank of 7,667ha. It also has stakes in plantation companies Eng Thye Plantations Bhd (83.3%-owned) and Timor Oil Palm Plantation Bhd (58%-owned).
In FY2022, NSOP had a planted area of 7,174ha, where 79.57% constituted mature trees. Trees in their prime comprised 13.58% of total planted area and those aged six to 10 years, which make up the largest portion of the company’s planted area, comprised 23.35%. The annual FFB yield per mature hectare was 16.91 tonnes and the extraction rate for CPO and PK was 17.98% and 4.64% respectively.
For 3QFY2023 ended Sept 30, 2023, NSOP’s net profit amounted to RM7.87 million, down 13% y-o-y from RM9.04 million.
Both companies are cash-rich: NSOP held RM158 million as at 3QFY2023 and Chin Teck had RM408.45 million as at 1QFY2024.
The plantation companies are consistent in their dividend payouts, which are made semi-annually. NSOP’s and Chin Teck’s 12-month dividend yield is 3.73% and 2.95% respectively, according to Bloomberg data.
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