Oriental's strong balance sheet to enhance growth
Source: The Star
GEORGE TOWN: Oriental Holdings Bhd (OHB) will spend RM58.8mil in financial year 2024 (FY24) for new planting, acquiring plant and machinery for an oil mill, and constructing an estate building.
In FY23, the group spent RM98.3mil in capital to acquire land in Malaysia and develop its Indonesian operations, including new and replanted oil palm, construction of staff quarters, and acquisition of agricultural equipment and vehicles.
According to its latest annual report, OHB will replant 116ha in Malaysia in FY24. Some 272ha of oil palms were replanted in FY23 compared with 270ha in FY22 for its plantations in Malaysia.
In Indonesia, OHB plans to replant 2,000ha in FY24. The group has planted 13,370ha and will grow about 600ha to 800ha yearly over the next two years.
Some 790ha were replanted in Indonesia in FY23 compared to no replanting in FY22.
The annual report stated that all replanting activities will be carried out sustainably and under an environment-friendly, zero-burning policy.
As of Dec 31, 2023, the group's plantation land bank concession stood close to 106,000ha, of which 46,047ha have been planted with oil palm trees.
About 97,397ha are on Bangka Island and South Sumatra in Indonesia, while the remaining 8,603ha are in Pahang, Negri Sembilan, Penang and Kedah.
The segment currently has a matured area of 38,021ha. The group also has five palm oil mills in Indonesia and Malaysia, with a combined operating capacity of 320 tonnes per hour, process crops from their own estates and crops purchased from smallholders, fresh fruit bunch (FFB) traders and other third-party estates.
The four palm oil mills in Indonesia are strategically located near the plantations.
According to the Malaysian Palm Oil Board, CPO prices in 2024 are expected to range between RM3,900 and RM4,200 per tonne, driven by Indonesia's B35 biodiesel policy.
The mandate is expected to reduce the global palm oil supply for the export market, consequently boosting CPO prices.
Meanwhile, as a healthcare service provider, the group has formulated a 10-year direction that will grow its Oriental Melaka Straits Medical Centre (OMSMC) into a full-fledged 300-bed tertiary medical centre offering multidisciplinary medical services with subspecialties that provide quality and value-based services and have a strong presence in the community.
In 2024, the group's healthcare segment will continue pursuing plans to seek opportunities to reach out to foreign medical travellers, set up new retail pharmacy outlets in a wholesome community-based setting to serve as a contact point for recruitment and maintenance of customers into the OMSMC healthcare ecosystem, and continuously work on digital transformation to improve operational efficiency and improve patient experience; and look for further expansion both organically and inorganically, whenever an opportunity arises.
In 2024, the leisure travel sector will capitalise on the pent-up demand accumulated from the pandemic years.
"Despite the prevailing financial uncertainties, the sustained enthusiasm for in-destination experiences, a growing appetite for exploring diverse locales and the continued trend of workplace flexibility all contribute to positive trends in the travel industry.
"Key priorities going forward for our segment include focusing on performance turnaround, strengthening digital presence, defending our domestic market share while driving regional growth, and pursuing more meetings, incentives, conventions and exhibition business events.
"We will reserve about 3% to 4% of our revenue per year for capital expenditure to ensure the properties remain in optimal condition at all times to create positive customer experiences," the report added.
On its automotive segment, OHB noted the Malaysian Automotive Association forecast a lower total industry volume of 740,000 units of vehicles in 2024, given the uncertainties in the global economy, restrained consumer spending due to concerns over the targeted subsidy rationalisation, rising cost of living, and the implementation of the proposed high-value goods tax and a higher service tax rate for some services including motor vehicles repair and maintenance.
Based on the current market and economic outlook, the group anticipates a challenging economic environment in Malaysia and overseas markets.
According to the annual report, the group is confident that its business fundamentals are strong, and its strong balance sheet and assets will provide the foundation to meet the challenges and drive growth.
The investment properties and trading of building material products segment expects its performance to remain challenging because of the ongoing uncertain business environment coupled with the higher price of building materials.
The group will continue strategising, adapting, and navigating the challenging business environment and take appropriate initiatives to minimise operating risks and optimise its resources to ensure the resilience of its businesses.
It will continue to focus on completing the reclamation of the remaining 110 acres in Melaka and explore opportunities to raise the value of its land bank for development whenever opportunities arise.