Japan's agritech company MYFARM Inc is investing RM210 million in PLS Plantations Bhd's large-scale durian cultivation project spanning over 1,000ha of land in Raub, Pahang. The investment marks the largest in durian plantations by a Japanese company.
PLS Plantations group chairman Tan Sri Nazir Razak said the capital injection from the Japanese agritech company will help the construction and plantation group realise a portion of its early investment in durian plantations.
“As you know, durian plantations have a long gestation period of five to seven years before generating any cash flow. From this partnership, we can monetise some of our early investment,” he told reporters after the signing of a joint venture (JV) and shareholders’ agreement between PLS Plantations' 51%-owned subsidiary PLS-LESB Sdn Bhd, MYFARM and MYFARM's unit Millennium Agriculture Technology Sdn Bhd (MAT) on Sunday (March 5).
Under the deal, MAT will subscribe to a 49% stake in JV company Akar Barat Jaya Sdn Bhd and has agreed to pay PLS-LESB RM210 million of the investment consideration. PLS-LESB will be the majority stakeholder in the JV vehicle, with a 51% stake.
Based on a back-of-the-envelope calculation, Akar Barat is valued at RM429 million.
Nazir said PLS Plantations has a total of 1,500ha of land, planted mostly with Musang King durian trees with profiles ranging from zero to three years old.
“Over the next three to five years, the group will see more meaningful returns from the durian plantation segment. In the next five to seven years, PLS Plantations will see its revenue contribution from oil palm plantations reduced to 20% from 80% presently,” he said, adding that PLS Plantations is also looking at other types of cash crops, including pineapple and bananas, to take part in the nationwide food security programme.
Nazir pointed out that PLS Plantations is aiming to have an additional 10,000ha of plantation land for its cash crops in the next five years, depending on the group's potential to rope in partners.
Under the partnership, MYFARM will also work together with PLS Plantations to improve technology at PLS Plantations' durian farms, as well as with other local farmers to improve production and harvesting techniques.
PLS Plantations executive vice-chairman Tan Sri Lim Kang Hoo, who holds a 67% stake in the company via Ekovest Bhd, said the JV partnership with MYFARM would pave the way for Japanese technology transfer and participation in Malaysia’s long-term food security programme.
“On a bigger scale, PLS Plantations would also want to tap on Japanese expertise in the agriculture sector to be part of the national food security measures,” Lim told The Edge on the sidelines of the signing ceremony.
MYFARM operates one of the largest agricultural schools in partnership with Tokyo Agricultural University and has produced 2,300 graduates over the past 12 years.
Its shareholders include Japan’s National Federation of Agricultural Cooperative Associations, Tsumura & Co (a Japanese herbal medicine manufacturer listed on Tokyo Stock Exchange), Nichiryu Nagase Co Ltd (a leading Japanese distributor of agricultural machinery and farm products), DCM Holdings Co Ltd (one of the largest home improvement businesses in Japan) and SB Technology Co Ltd (previously known as Softbank Technology Corp).
In addition, Akar Bakar has entered into an offtake agreement with Dulai Fruits Enterprise Sdn Bhd, a 70%-owned subsidiary of PLS Plantations, to purchase all the durians produced by Akar Bakar.
Dulai Fruits has an exclusive distribution agreement with China Oil and Foodstuffs Corp, which is China’s largest food processor, manufacturer, and trader.
Meanwhile, PLS Plantations executive director and group chief executive officer Lee Hun Kheng said the group is aiming to invest about RM90 million in capital expenditure over the next two years for its durian and pineapple plantations.
“We are looking to start with 10,000 acres of land for pineapple plantation as a start,” he said.
PLS Plantations closed up six sen or 6.32% at RM1.01 on Friday (March 3), giving it a market capitalisation of RM444.02 million. Its share price has risen 12.22% year to date.