This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Negri Sembilan Oil Palms Bhd (KL:NSOP) has had a long-standing presence in the plantation industry. Incorporated in March 1928 and listed on Bursa Malaysia’s Main Market in October 1969, the small-cap planter is 55.13%-owned by Tiong Thye Co Sdn Bhd, which is controlled by the Goh family from Singapore.

The group operates four estates: Ladang Senama in Negeri Sembilan, Ladang Ibam in Pahang, Ladang Gula in Perak, and Ladang Maran in Pahang, covering a total area of about 7,667ha. It also runs two palm oil mills with a combined milling capacity of 40 tonnes per hour.

NSOP’s subsidiaries include its 83.3%-owned Eng Thye Plantations Bhd and 58%-owned Timor Oil Palm Plantation Bhd. In addition, through its 40%-owned joint venture Chin Thye Investment Pte Ltd, the group has interest in an oil palm plantation in South Sumatera province, Indonesia.

NSOP achieved an impressive profit after tax (PAT) compound annual growth rate of 57.2% over the past three years. This outstanding performance, the highest among its peers, earned NSOP the accolade of the highest PAT growth over three years in the plantation category at The Edge Malaysia Centurion Club Corporate Awards 2024.

NSOP’s net profit skyrocketed to RM24.7 million in FY2021 from RM1.3 million in FY2020, and rose 12.6% year on year (y-o-y) to RM27.8 million in FY2022.

The increase in profitability between FY2020 and FY2021 was due to higher crude palm oil (CPO) prices and an 8.93% rise in the production of CPO.

Like many other planters, NSOP’s FY2023 earnings were affected by lower commodity prices due to increased global output, rising inventory and the economic performance of other oil crops. Consequently, net profit fell 34.9% y-o-y to RM18.1 million. The average selling prices of fresh fruit bunch (FFB), CPO and palm kernel (PK) weakened by 26.48%, 24.03% and 39.67% respectively during the year.

As at end FY2023, NSOP had a planted area of 7,174ha, of which 87% were planted with mature palms. Trees in their prime accounted for 15.14% of the total planted area, while those aged six to 10 years, making up the largest portion, comprised 29.47%. The annual FFB yield per mature hectare was 17.78 tonnes, and the extraction rates for CPO and PK were 17.57% and 4.6% respectively.

Looking ahead, NSOP anticipates a moderation in average CPO and PK prices for 2024 due to a recovery in palm oil supply from Malaysia and Indonesia, along with the potential impact from a global economic slowdown.

“Since the end of FY2023, the average selling prices of CPO have strengthened. Should this trend remain, it would have a corresponding effect on the financial performance of the group in FY2024. The long-term prospects of palm oil [are] promising, as there is global demand for palm products,” the group said in its 2023 annual report.

Tight supply of human resources, particularly of guest workers, is an ongoing challenge faced by the group, though significantly ameliorated by the availability of new guest worker quotas awarded by the authorities and efforts to mechanise operations.

On its replanting programme, NSOP said its replanting schedule spans a period of 10 years, with quarterly reviews to ensure progressive replanting on a yearly basis. At each review, prevailing conditions and circumstances are taken into consideration to determine the replanting programme.

In FY2023, 107ha of old and low-yield palms were replanted. About 193ha of old and low-yield palms are expected to be replanted in FY2024.

NSOP maintains a healthy financial position with no borrowings. As end-2023, its cash and bank balances stood at RM164.71 million. The group’s strategy is to maintain a debt-free capital structure and pay a steady amount of dividends to its shareholders.

Although it has no formal dividend policy, the group has consistently paid dividends over the years, with payouts of 39.86% in FY2021, 43% in FY2022, and 46.58% in FY2023.

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