YPJ Oil Palm Estate Sdn Bhd - 2007

MARC has affirmed YPJ Oil Palm Estate Sdn Bhd’s (YPJ) RM180 million Guaranteed Commercial Papers (CP) rating at MARC-1 (bg) with stable outlook. The affirmation reflects the strength of the unconditional and irrevocable guarantee provided by a consortium of financial institutions comprising Affin Investment Bank Berhad, Affin Bank Berhad and CIMB Bank Berhad.

YPJ is principally involved in the cultivation and management of palm oil estates. Currently, YPJ manages its own 10,693 hectares of palm oil estates known as Ladang YPJ, Ladang Yayasan, Ladang Alaf (which are located in Kulai) and Ladang Payamunis located in Mersing.  As at December 2006, matured palm oil occupied 83% of total planted area or 8,684 hectares, of which over 56% are prime and matured trees between the age of 5 to 20 years.  Immature fields of less than four years old meanwhile, accounted for 17% of the total planted area. YPJ’s sole mill in Kulai has an installed processing capacity of 30MT/h and registered an efficiency level of around 96% as at March 2007.

Based on audited accounts for FY2006, YPJ reported a 16% gain in revenue year on year to RM80.94 million (FY2005: RM67.7 million), on account of increased CPO output. The company produced approximately 39,716 tonnes of CPO in FY2006, 21% higher than the previous year. This was further aided by higher selling prices of CPO and FFB in 2006, averaging RM1,499 and RM282 per tonne respectively (FY2005: RM1,413 and RM273 per tonne). Meanwhile, operating profit margin was satisfactory at 34%.

YPJ is projected to dispose a total of 1,567 acres of land worth approximately RM70.3 million from 2007 to 2011 to facilitate the development of Bandar Akademi YPJ. While sale of land prominently features as a recurring source of income for YPJ, its contribution going forward, is expected only to account for about 7% of total annual revenue in the next four years.

Going forward, sales of FFB and CPO will continue to be the two main revenue sources. An average CPO price of RM1,700 over the remaining tenure of the CP, would yield comfortable annual operating profit margins, which would average 28% during the CP’s tenure on the back of steady growth in production yield.

YPJ’s financial flexibility is mainly drawn from YPJ Corporation Sdn Bhd, its parent/holding company which in the past had made advances in excess of RM100 million to YPJ. In FY2005, YPJ’s debt-to-equity ratio saw substantial reduction as a result of RM246 million revaluation reserve pertaining to its long leasehold land and plantation development land. This entire revaluation reserve is expected to be capitalised into a combination of ordinary and preference shares to facilitate the impending listing exercise of YPJ. As of December 2006, the company’s borrowings amounted to RM166 million, comprised mainly of the CP facility.