This article first appeared in The Edge Financial Daily on June 1, 2017 - June 7, 2017

KUALA LUMPUR: Diversified conglomerate Hap Seng Consolidated Bhd is looking at expanding its plantation acreage in Sabah.

With crude palm oil (CPO) prices coming off their highs and expected to hover between RM2,500 and RM3,000 per tonne, some people are more willing to sell land, said group managing director Datuk Edward Lee Ming Foo (pic) after Hap Seng’s annual general meeting yesterday.

Hap Seng’s plantation division, which is housed under its listed arm Hap Seng Plantations Holdings Bhd, is expected to continue being a stable contributor to the group’s revenue, with a CPO production cost of RM1,159 per tonne, according to Lee.

The group currently owns 40,279ha across Sabah, of which some 89.6% consists of mature trees.

For the first quarter ended March 31, 2017 (1QFY17), Hap Seng reported a 10.11% rise in net profit to RM154.38 million from RM140.21 million on improved revenue in nearly all its divisions.

Quarterly revenue was up by 11.8% at RM1.18 billion from RM1.05 billion a year ago, according to the group’s filing with Bursa Malaysia yesterday.

Revenue growth was mainly driven by the property and building material segments, which were up 13.7% to RM203.21 million and 46% to RM330.38 million respectively.

However, the plantation unit was the largest contributor to Hap Seng’s operating profit. The division’s operating profit leaped 95% to RM46.16 million.

Hap Seng Plantations is also targeting to gain the Hazard Analysis and Critical Control Points certification for its remaining three mills without the accreditation.

The accreditation would affirm that the group’s products are suitable for usage in the food industry, thus enabling Hap Seng to tap a wider market, executive director Cheah Yee Leng said.

Meanwhile, the group expects to launch properties with a total gross development value of RM1.86 billion this year. It currently has unbilled sales of RM1.6 billion, which are expected to be recognised in the next two to three years, according to Lee.

The group has a total land bank of 3,105 acres (1,257ha), which is almost equally divided between East and West Malaysia, said Cheah.

Hap Seng is expecting revenue from building material unit to grow following its acquisition of Malaysian Mosaics Sdn Bhd, which recognised contributions for seven months in the financial year ended Dec 31, 2016 (FY16).

According to Lee, Hap Seng’s Singapore-listed subsidiary, Hafary Holdings Ltd, is looking at expanding its tile distribution in Vietnam and is also looking at expanding operations in Myanmar.

Meanwhile, the sale of its wholly-owned transportation and logistics arm, Hap Seng Logistics Sdn Bhd, for RM250 million is expected to pare down the group’s debt to 0.5 times from its current level of 0.62 times.