03 February 2013

The Old & New Palm Oil Growers Scheme

Both schemes have been categorized as "share-farming" interest scheme by Securities Commission of Malaysia, yet, both were in the limelight lately due to their contradict directions. The old one (Country Heights Growers Scheme) is wooing investors to terminate it, while the new one (Golden Agro Growers Scheme) is wooing investors to invest.


Why CHGS was in HOT water?
CHGS was the 1st oil palm plantation investment scheme in Malaysia. Launched in 2007, it guaranteed a 8% return annually for first 3 years, and subsequently it is projected to distribute the returns of over 11% per year throughout a period of 20 years. However, voluntary early termination of the scheme was proposed recently, citing that CHGS was unable to reach its full potential because of poor fresh fruit bunches (FFB) yield. Various factors were given such as unpredictable weather conditions, incursions of wild elephants into the estate, poor soil fertility, shortage of key personnel and manual workers, and uncompromising terrain.


How Good is GAGS?
On the other hand, the new GAGS guaranteed 7% return yearly for first 5 years. Subsequently, investors will enjoy 100% of the net profit of the plantation until 20 years maturity. Investors were told that margins associated with the palm oil industry have always been good traditionally. So, in the event of falling CPO prices, it still can make money if the estate was managed well and efficiently. A mill was also planned to be set up in 4 to 5 years to avoid uncertainties of refusal by external millers.


Are they related?
Although Finance Malaysia opines that both schemes were not related, but the timing of it is somewhat makes us curious. Is it really so coincidence? It was like giving the existing investors of CHGS the chance to switch over their investments to GAGS. Both schemes are very much similar, but with different people managing them which is the key determining factors for its success or failure. Anyway, Finance Malaysia doubt the success of the new GAGS which don't have proven track record and was planted in Sarawak where peat soil may increase the cost of planting. The problems faced by CHGS may reoccurred on GAGS in the future. Estate management plays an important part in such scheme.



5 comments:

  1. Good article, Mtsen. I saw this scheme when it first came out but I give it a miss :D

    Even big CPO-related companies are suffering losses because of weak CPO prices, so i am not surprised CHGS is asking investors to terminate. At least, nothing bad happen :D

    ReplyDelete
  2. I think something bad will most likely happen. There is no guarantee that investors will be repaid in full in 2 years, after the scheme is terminated at the coming AGM.
    What if after termination, this MR$2 company declares bankruptcy by claiming huge losses n then disappears without a trace.? This is all legal, in business.

    CHGS has collected MR$215million in 2007 from the investors and has, so far, repaid them back about half of that(=$107million) in annual interest, up to 2012. This was done, may be, to gain the confidence of the investors.
    CHGS still holds $108million of their money. CHGS might hv used some of those millions($40million.?) to give a semblance of running an oil palm estate in Kelantan. This will still leave CHGS holding tens of MR$millions.

    Even if the termination is not approved by the investors, it will not change anything, as the Trustees of CHGS may be in cahoots with the CHGS masterminds, ie to purposely bankrupt the scheme/company.

    The CHGS masterminds may be laughing all their way to the banks, to deposit their hidden tens of MR$millions that were supposedly business losses.
    Sometime later, the masterminds may reappear on the corporate scene with another P-scheme, under a different name, after the heat on the CHGS fiasco has cooled off.

    This is similar to abandoned housing schemes where the housing developers n their MR$2 companies declare bankruptcy n disappear with the $millions collected from housebuyers.

    Caveat Emptor.

    ReplyDelete
  3. Hi Everyone,

    The last comment was made in Feb 2013. By now, we all know the outcome of CHGS. Every investors of CHGS got 100% of their capital back and made an average of 10% per annum.
    It is not fair to say that CHGS is a P-scheme. It is a legal scheme and the Trustee played a role in ensuring that all investors interest are protected. Congratulations to all investors of CHGS.

    CHGS failed because of poor management and delayed in planting. If CHGS were to plant up the entire plantation according to their original plan (ie by 2010), their palms would be producing healthy FFB by now.

    Being the first in the market, CHGS was too optimistic and offered the public an over generous formula. I guess the over generous minimum guaranteed return of 12% is also the reason why Tan Sri Lee decides to terminate the scheme.

    CHGS and GAGS are definitely not related at all as the management company is totally different. And GAGS is a lot more prudent in their promise to investors. I am very confident that GAGS has got the formula right and it is the most sustainable shared farming scheme in Malaysia.

    We shall keep everyone posted on the progress and outcome of GAGS in time to come.

    ReplyDelete
  4. This comment has been removed by the author.

    ReplyDelete
  5. hi, may i know which website can i check the sharing profit investment scheme it is register as show above.
    Thx

    ReplyDelete

Finance Malaysia Blog appreciates your comment. Cheers!

Related Posts Plugin for WordPress, Blogger...