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What Investors Should Know About Malaysian Palm Oil Company: Kuala Lumpur Kepong Berhad

One of the industries that Southeast Asia dominates would be the palm oil industry.

There are many palm oil players in Singapore’s stock market. A few of the larger ones – in terms of the size of their business – are Wilmar International Limited (SGX: F34), Golden Agri-Resources Ltd (SGX: E5H), and First Resources Ltd (SGX: EB5). There are also a handful of such companies in Malaysia.

In here, let’s look at one of the larger Malaysia-listed palm oil companies: Kuala Lumpur Kepong Berhad (KLSE: 2445.KL). The company has over 270,000 hectares of plantation land that is spread across Malaysia, Indonesia, and Liberia.

Business Segments

Kuala Lumpur Kepong has a number of different businesses as you can see in the table below:

Kuala Lumpur Kepong Berhad revenue table Source: Kuala Lumpur Kepong annual report (figures in RM’000)

The company’s business has two major segents: Palm products and Manufacturing. Together, they accounted for 97% of the company’s total revenue in 2015.

The Palm products segment focuses on the cultivation of the palm oil fruit and the processing and refining of palm oil.

The Manufacturing segment sees Kuala Lumpur Kepong manufacture a wide range of products, including oleochemicals, soap noodles, industrial amides, fatty amines, cationic surfactants, rubber gloves, and more.

Plantation age profile

When it comes to palm oil producers, the age profile of the trees in their oil palm plantations could be an important thing to observe. That’s because the productivity of oil palm trees changes with age. Here’s how Kuala Lumpur Kepong’s plantation age profile looks like:

Kuala Lumpur Kepong Berhad plantation age profile
Source: Kuala Lumpur Kepong annual report

As the chart shows, 46% of the company’s oil palm trees are currently still younger than nine years. As these trees mature, their ability to produce fresh fruit bunches should increase, leading to higher production of crude palm oil.

Major shareholders

Kuala Lumpur Kepong’s major shareholders are Tan Sri Dato’ Seri Lee Oi Hian and Dato’ Lee Hau Hian. Through various investment vehicles, the two individuals – who are bothers – collectively control nearly 47% of the company’s shares.

Lee Oi Hian has been the chief executive of Kuala Lumpur Kepong since 1993. Over the company’s last 10 fiscal years (from the years ended 30 September 2005 to 30 September 2015), its revenue has nearly quadrupled from RM3.79 billion to RM13.7 billion while its profit has more than doubled from RM421 million to RM870 million.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.