Analysts' Briefing of KLR1Q12 -110711 Profile of KLR1Q12...Notes: The Group’s ... The statistics...

Corporate Profile

29 July 2011

2K I M L O O N G R E S O U R C E S B E R H A D ( 2 2 7 0 3 - K )

Introduction to Kim Loong Resources Berhad

(“KLR”) Group

• KLR’s holding company, Sharikat Kim Loong Sendirian Berhad, had its beginning back in 1967 with a 1,000 acre rubber plantation in Ulu Tiram, Johor

• KLR is listed on the Main Market of Bursa Malaysia Securities Berhad since year 2000 and currently with a RM670 million market capitalisation

• KLR is primarily involved in oil palm cultivation and related businesses which include the following:

• More than 37,000 acres of oil palm plantations in Sabah, Sarawak and Johor (excluding potential additional 10,000 acres of plantable NCR land to be secured and developed)

• 3 palm oil mills located in Johor and Sabah with a total processing capacity of 205MT of FFB per hour


Group Structure (Active Companies Only)AS AT 31 January 2011

KLR

100%

OHSB

100%

KLPO

100%

KLSM

100%

KLT

90%

WYSB

70%

DKLPO

70%

KL-KPD

70%

PNSB

51%

DOSB

100%

KLPOM

68%

WAY

100%

SESB

60%

KLE

100%

KLPw

100%

KLC

60%

WPPSB100%

KLTSSB


Principal activities

Business Activities

Plantation operations Milling operations

Oil PalmFFB

CocoaCrude

palm oilPalmkernel

Biomass,

bio-fertilizer,

tocotrienol,

solvent extracted

palm oil, CER

Palm kernel oil

Palm Kernelexpeller


Recent Developments

� Kim Loong Corporation Sdn Bhd (“KLCSB”), a wholly owned

subsidiary of KLRB had on 30th November 2009 entered into a

Sale and Purchase Agreement with Tetangga Akrab Sdn

Bhd (“TASB”) for the acquisition of 60% equity interests in

Winsome Pelita (Pantu) Sdn. Bhd. (“WPPSB”) for a cash

consideration of RM25,000,000, which includes the assignment

of approximately RM13.3 million of amount owing to the vendor

by WPPSB. The acquisition was completed on 6 January 2010.

� WPPSB was incorporated for the purpose of developing land held

under Native Customary Rights specifically in the area known as

Sg. Tenggang Block (6,870Ha) and Kranggas/Mawang

Block (3,601Ha), Bukit Bengunan in the Sri Aman Division,

Sarawak into an oil palm plantation.


Recent Developments (Cont’d)

� Out of the total gross land area 10,471 Ha, the preliminary

estimated plantable area is approximately 6,500 Ha. To-date,

1,400 Ha have already been planted. The plantable area is

subject to Pelita Holdings Sdn Bhd (“PHSB”), the Government

agency which monitors the implementation of the project, obtaining

acceptance from the NCR owners of those areas to participate.

� The plantable land is of mineral soil with flat and undulating terrain

and therefore suitable for development. We plan to develop the

remaining plantable land within the next 4 years.


Financial Highlights

2010 2011 1Q2012*

Revenue (RM'000)451,533 563,408 175,150

EBITDA (RM'000) 99,795 111,649 41,178

Profit before tax (RM'000) 79,455 90,632 35,156

Weighted Average No. of Share ('000) 303,271 304,657 305,387

Shareholders' equity (RM'000) 421,970 445,143 468,199

Basic earnings per share (Sen)15.9 19.1 6.5

PE Ratio (times)12.9 12.5 N/A

Return on Capital Employed (Pre-tax) [N1]15.8% 17.2% 6.2%

Return on Total Equity (Pre-tax)17.3% 18.4% 6.7%

Return on Total Assets (Pre-tax)13.4% 14.6% 5.2%

Gearing 0.13 0.10 0.11

Financial year

FINANCIAL PERFORMANCE

* Based on unaudited 3 months results ended 30 April 2011.

N1 : Capital Employed includes Total Equity and Bank Borrowings.


Financial Highlights (continued)

REVENUE

2010

RM'000

2011

RM'000

Plantation 113,686 126,282 48,448

Palm Oil Milling 442,989 561,757 176,903

Less : Inter-segment eliminations (105,142) (124,631) (50,201)

TOTAL GROUP 451,533 563,408 175,150

RESULTS

Plantation 52,198 66,228 34,066

Palm Oil Milling 32,532 27,053 5,299

84,730 93,281 39,365

Inter-segment eliminations (2,193) 1,112 (4,150)

Unallocated cost ** (3,540) (4,170) (387)

Finance income 1,817 2,641 757

Finance cost (1,359) (2,233) (429)

Other investment income - 1 -

Profit before tax 79,455 90,632 35,156

1Q2012*

RM'000

Financial Year

ANALYSIS BY SEGMENTS

** Unallocated cost mainly consists of salaries and other office administration cost net of management fee and

commission income receivable.



Financial Highlights

2010 2011

Net profit attributable to equity holders

of the Company (RM'000)

48,138 58,256 19,906

Net dividend declared (RM'000) 30,428 **36,630 -

Gross Dividend Per Share (sen) 10.0 12.0 -

Gross Dividend Yield (%) 4.9% 5.0% -

Dividend Pay-out (%) 63.2% 62.9% -

Market Price at period end (RM) 2.05 2.38 2.21

NTA per share (RM) 1.38 1.46 1.53

1Q2012*

Financial Year

DIVIDEND PAYMENT RECORD

** An interim dividend of 5 sen single tier tax exempt paid on 16 December 2010 and final dividend of 7 sen single tier tax

exempt proposed for financial year ended 31 January 2011.

.



Oil palm estates (7,220 Ha)

Keningau

Oil palm estate(1,997 Ha),

Telupid

Oil palm estate(2,731 Ha),

Sandakan

Oil palm estate

(1,093 Ha) Kota

Tinggi, Johor

Plantation Operations :

PENINSULAR

MALAYSIA

SARAWAK

SABAH

Sandakan

Pasir Gudang

LOCATION OF OPERATIONS

Oil palm estates (10,471

Ha) Sg.Tenggang/Kranggas


Palm oil mill (60MT

FFB/hr), Sook, Keningau

Palm oil mill (100MT

FFB/Hr), Kota

Tinggi, Johor

Palm Oil Milling:

PENINSULAR

MALAYSIA

SARAWAK

SABAH

Sandakan

Pasir Gudang

MILLING LOCATION

Palm oil mill (45MT

FFB/hr), Telupid


StatisticsPRODUCTION, AREA AND AGE OF PALMS

PRODUCTION FINANCIAL YEAR

2011

(MT)

1Q2012

(MT)

%

FFB 227,325 70,918 31.2

CPO 165,252 46,501 28.1

PK 40,591 10,996 27.1


FFB PRODUCTION

PRODUCTION, AREA AND AGE OF PALMS (CONTINUED)

Statistics (continued)

220,908

248,268

272,334262,687

227,325

70,918

0

50,000

100,000

150,000

200,000

250,000

300,000

2007 2008 2009 2010 2011 1Q2012

FINANCIAL YEAR

MT

FFB (MT)


FFB YIELD PER HECTARE


19.96

22.18

24.33

21.71

19.0320.18

19.218.0317.39

0

5

10

15

20

25

30

2007 2008 2009 2010 2011

FINANCIAL YEAR

MT

/Ha

KLR Group

Malaysia


Notes: ▲The Group’s FFB yield for FY 2011 dropped by 20% compared to FY 2010 mainly due to:

i) Increase in young mature area;

ii) Mainly due to significant drop in production in our estates in Keningau. This was broadly in line with the drop in FFB production in this region; and

iii) In line with the change in cropping trend nationwide.


OIL YIELD PER HECTARE


0

1

2

3

4

5

6

FINANCIAL YEAR

MT

/Ha

KLR - Sabah estate 4.76 5.34 5.70 5.39 4.47

Sabah state 4.88 4.89 4.85 4.52 4.30

2007 2008 2009 2010 2011


Note :

The statistics for Sabah state are extracted from MPOB web-site based on calendar year 2006 to 2010 whilst the figures from KLR are based on its financial year (Feb – Jan).



CPO OER COMPARISON

19.32 18.8919.90 19.65

23.87 23.1121.27 21.27

0

5

10

15

20

25

30

2010 2011

FINANCIAL YEAR

%

KLR - Johor

Johor State

KLR - Sabah

Sabah State


Note :

The statistics for Johor and Sabah state are extracted from MPOB web-site based on calendar year

2009 and 2010 whilst the figures from KLR are based on its financial year (Feb – Jan).


19%

21%60%

< 5 years 5 - 10 years > 10 years

Statistics (continued)PRODUCTION, AREA AND AGE OF PALMS (CONTINUED)

AGE PROFILE OF PALMS (AS AT 31 January 2011)


Achievements

KENINGAU MILL WAS

AWARDED BY MPOB

FOR ACHIEVING OER

EXCEEDING 25% IN

YEAR 2005.

KENINGAU MILL WAS

AWARDED BY MPOB AS

THE HIGHEST OER MILL

IN MALAYSIA IN YEAR

2007.


Achievements (continued)

KOTA TINGGI MILL WON

THE MOST INNOVATIVE

MILL AWARD BY MPOB

FOR THE YEAR 2002.

Our Kota Tinggi Mill is one of the largest

commercial mills in Malaysia

Based on MPOB statistics, in

1998 and 1999, KLPOM was the

largest commercial mill in

Malaysia in terms of tonnage of

CPO production.



KIM LOONG RESOURCES

BERHAD RECEIVED AN

AWARD FROM MALAYSIA

COCOA BOARD UNDER

COCOA ESTATE CATEGORY.



KIM LOONG RESOURCES

BERHAD RECEIVED THE

SHAREHOLDER VALUE AWARD

2010 (AGRICULTURE &

FISHERIES SECTOR) FROM

KPMG .



» The FIRST Palm-pressed Fibre Oil Extraction (“PFOE”) plant in the World.

The Group has successfully commissioned the PFOE plant in September 2007 and operated profitably

ever since.

» The FIRST registered methane emission reduction CDM Project from palm oil

mill effluent in the World.

The Group has successfully registered its biogas project with the Clean Development Mechanism

(“CDM”) Executive Board of United Nations Framework Convention on Climate Change (“UNFCCC”) on 8

April 2007. The plant was fully commissioned in August 2008 and is awaiting certification of CER

generated.

» Selected as one of the TOP 100 MALAYSIAN SMALL CAP COMPANIES by OSK

for 3 consecutive years from 2005 to 2007

(Source : “TOP MALAYSIAN SMALL CAP COMPANIES – 100 HIDDEN JEWELS” PUBLISED BY OSK

RESEARCH SDN BHD)

» Selected as one of the TOP 10 SMALL CAP COMPANIES out of the 100

Companies for year 2006 and 2007.


Competitive Strengths

1. High FFB production yield will lead to strong cash flows and

financial position :

» A large proportion of palm trees in our estates is at its prime age which

offer strong FFB production yield.


290,000 320,000

020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000220,000240,000260,000280,000300,000320,000340,000360,000380,000400,000

2012 2013

FINANCIAL YEAR

MT

(F

FB

) Projection

Estimate

Note : Projection of production is based on existing land bank.

FFB PRODUCTION PROJECTION

Competitive Strengths (continued)



2. Higher utilisation of milling capacity :

» The improved FFB intake for Telupid mill will increase the utilisation of milling capacity in Telupid.

» Higher OER from mills will generate higher processing margin for mills and better FFB price for estate operations.

Kota Tinggi mill Keningau mill Telupid mill


The Company has achieved complete integration of milling operations

resulting in improved efficiency and at the same time generating

additional income from wastes. We have positively contributed towards

reducing the pollution impact of our palm oil mills on the environment

and improved sustainability of palm oil production.

Some of our projects in improving efficiency and conversion of wastes

through new innovation and technology are as follow:

- PFOE plant in our Kota Tinggi mill & Keningau mill

� The plant will extract residual oil from pressed fibre and increase OER by

about 0.5%.

� Profit after tax based on average selling price of RM2,756/MT in FY2011

is RM2.35 million in Kota Tinggi mill.


3. Improved efficiency and additional income from wastes in Mill


(Cont’d)

- Biogas CDM project at Kota Tinggi mill, Keningau mill & Telupid mill

� This project will reduce greenhouse gas emissions from palm oil mill effluent by capturing the methane gas emissions to generate power/ steam, thereby reducing environmental impact of milling operations.

� Expected CER sale will generate tax free profit of RM2 million per year for each of the Kota Tinggi & Keningau mill when in full operation.

- Full conversion of biomass into fuel for milling operations.

� Sale of surplus shell to replace usage of fossil fuel. The revenue for FY2011 from the sale of shell to third parties is RM1.7 million from Kota Tinggi mill.

- Bio-fertiliser plant at Kota Tinggi mill

� Convert part of the oil palm biomass and decanter solids into bio-fertilizers for local and international markets. However, contribution from this plant is much reduced in FY2011 owing to lack of raw materials.


3. Improved efficiency and additional income from wastes in Mill



� Latest planting material and technology shall be used to improve yield potential from plantation operations.

� Recycling mill wastes to improve soil in plantations.

� To improve productivity and reduce reliance on foreign labour through mechanisation on certain activities and areas suitable for mechanisation.

4. Commitment to improve efficiency in Plantation



5. Management Capability

» Top management has over 35 years’ experience in oil palm industry.

» Capable managers and supporting staffs in all business entities.

» Ability to identify commercially viable projects for expansion or

diversification backed by strong in-house research capability


BUSINESS

OUTLOOK

AND

STRATEGIES


Near Term Prospect

Plantation

» The FFB production for plantation operations in FY2011 is lower than the quantity achieved in FY 2010 which is broadly in line with the change in cropping trend seen nationwide. We expect the FFB production to recover from its low production yield cycle in FY2011 and achieve at least 20% increase in FY2012.

» We expect a contribution of 10,000MT FFB from the newly acquiredplantation in Sarawak in FY2012. Growth in production is expected from this plantation for the next few years. Main focus will be on development of the Sarawak plantations and maintaining good relationship with the joint venture native owners within our NCR land projects.

» Profit is expected to improve in FY 2012 due to the high CPO price.


Near Term Prospect (continued)

Mill

» We expect a marginal increase in profits from our milling operations in FY2012 as compared to FY2011 due to marginal increase in production quantity of milling operations.

» Increasing crops from newly matured plantations near our existing mills will improve capacity utilisation.

» Increase sales of excess palm kernel shells to third parties to a total of over RM2.5 million from all three mills.


Development of Downstream Projects

(a)Implementation of biogas CDM project at Keningauand Telupid mills� The Group has received approval for two Clean Development Mechanism

(“CDM”) projects under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (“UNFCCC”).

� Both biogas plants in our Kota Tinggi and Keningau mills are also operating as designed. We are waiting for the issuance of Certificates of Emission Reduction (CER’s) from CDM of UNFCCC for our Kota Tinggi plant. We have also completed preliminary verification of our Keningau plant.

� We are considering investment in a gas engine system to convert biogas generated from palm oil mill effluent (“POME”) into power.

(b) Kernel Oil Solvent Extraction Plant at Kota TinggiThe plant will increase the PKO extraction efficiency by approximately 2%.

At current high price of PKO, the estimated additional revenue is RM3 million.


(c) Tocotrienol Project

The Group has developed innovative processes for extraction of high quality

tocotrienol-rich fraction (a useful type of Vitamin E) from CPO. Currently, we are in

the process of further improving the yield for commercial production and sales.

The subsidiary company is expected to start commercial production in FY2012.

Tocotrienol capsules under the brand name e-Life Gold™ will be available in FY2012.

The company is also developing international niche markets for tocotrienol-rich

fraction in bulk.

The company is undertaking process modifications for higher production throughput

with lower production costs.

The global demand is expected to surge with more positive research evidence on

tocotrienols in disease prevention in contrast to the harmful effects of alpha-

tocopherol supplementation. The recent GRAS registration (FDA registration GRN

No. 307) shall extend the tocotrienols applications into the huge-capacity food

industry.


(continued)


Competitive advantages of our product:

� Our non-destructive processes preserves CPO for food applications whereas the utilisation of renewable energy

reduces productions costs and contributes to reduction in greenhouse gas emission. As a result, our production

cost is insensitive to CPO price fluctuation as the bulk of CPO used is preserved.

� We are publishing an article in Genes & Nutrition (a peer-reviewed journal) entitled "Unleashing the untold and

misunderstood observations on vitamin E". The article established the need to reduce α-tocopherol for effective

disease prevention, both in terms of absorption and potency. The article re-established the metabolism of vitamin E

and established a new metabolic pathway for tocotrienols in human body. The findings shall make our product

characteristics superior to that from all other tocotrienol producers.

� Contains lower content of α-tocopherol which is an undesirable component in tocotrienol-rich fraction as α-

tocopherol will lower the potency for diseases prevention.

� Contains higher δ-tocotrienol which has the highest potency for anti-cancers and cardiovascular diseases

prevention.

� Free from residual Fatty Acid Methyl Esters (“FAME”) contamination.

� Contains natural emulsifier that is present in palm oil.

� Zero-effluent technology. Avoiding the massive effluent generated by transesterification process.


(continued)



(continued)

Future Prospect

» Both solvent extraction plants in our Kota Tinggi and Keningau mills are

running satisfactorily, generating substantial revenue for the Group.

» The PFOE plant at Keningau can increase the OER by approximately

0.5% which is equivalent to about RM4.0 million increase in annual

revenue based on the estimated CPO price of RM3,000/MT.

» We expect the tocotrienol and CDM project to start contributing to the

Group’s revenue in the FY2012.


KLR Group’s Future Plan

KLR’s future plan include the following:

� To source for additional plantation land in Johor, Sabah and

Sarawak.

� Future sales of de-oiled fibre as raw materials for other

downstream products.

� Extraction and marketing of nutraceutical products from palm oil.

� To generate power from biogas for sale to TNB national and

Sabah Electricity Sdn. Bhd. grid.


THANK YOU

(22703-K)

(Incorporated in Malaysia under the Companies Act, 1965)

Contact person : Mr Gooi Seong Lim (Executive Chairman)

Tel : 607-2248316

Email : [email protected]


Corporate Fact Sheet

Corporate Address Lot 18.01, 18th Floor, Public Bank Tower

19, Jalan Wong Ah Fook,

80000 Johor Bahru, Johor, Malaysia

Directors Gooi Seong Lim Executive Chairman

Gooi Seong Heen Managing Director

Gooi Seong Chneh Executive Director

Gooi Seong Gum Executive Director

Gan Kim Guan Senior Independent Director

Chew Poh Soon Independent Director

Chan Weng Hoong Independent Director


Corporate Fact Sheet (continued)

Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad

Listed on 27 November 2000

Issued shares 306.2 million shares of RM1.00 par value

Market Cap RM670 million (based on share price of RM2.19 on 30 June 2011)

Major Shareholders Sharikat Kim Loong Sendirian Berhad 64.21%

(as at 9 June 11) Employees Provident Fund 2.48%

Krishnan Chellam 1.75%

Teo Chuan Keng Sdn Bhd 1.43%

Timbas Helmi Bin Oesman Joesoef Helmi 1.20%

Financial year end 31 January

Analysts' Briefing of KLR1Q12 -110711 Profile of KLR1Q12...Notes: The Group’s ... The statistics...

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