Friday, February 11, 2011

Golden Palm Growers Berhad VS. Country Heights Growers Scheme

Golden Palm Growers Berhad (GPGB) and Country Heights Growers Scheme (CHGS) are both palm oil management companies. They sell out plots of palm oil (quarter acre called grower’s plot) for the retail investors. CHGS led with this initiative (with its marketing efforts beginning from March 2007) and not only until only recently followed by GPGB (late 2010 till now). Both companies guarantee a return during the planting phase with CHGS paying out 8% for the first 3 years and GPGB paying out 6% for the first 6 years. The subsequent yields during the harvest phase will depend on the concurrent market CPO price. The current average spot settlement price of FCPO on January 2011 is RM3806. The bottom tables and graphs show what yields will be like following its subsequent CPO price.

CHGS payout during harvest phase:

GPGB payout during harvest phase:

At current FCPO price we will draw our attention to the green line on the above chart. Note that GPGB will only be paying out 6% of grower’s fee until 2016, then only realising returns from the indicative green line as above.
2010: Planting begins
2011: Phase 1 completes (30%)
2012: Phase 2 completes
2013: Phase 3 completes
2014: First harvest
2016: Full commercial yield

Let’s assume a hypothetical investment amount of RM100,000 being each invested into Fixed Deposits (we have to assume a ridiculous rule here; that is FD is fixed at 3% for 23 years), CHGS and GPGB. The below table will show at which years CHGS and GPGB will take to earn the same amount an FD will take to earn in 23 years (no inflationary adjustments are made).


Year
FD

CHGS

GPGB

3%
Payoff

Payoff

0
100000

100000

100000
1
103000
8000
108000
6000
106000
2
106090
8000
116000
6000
112000
3
109272.7
8000
124000
6000
118000
4
112550.9
12000
136000
6000
124000
5
115927.4
12000
148000
6000
130000
6
119405.2
12000
160000
6000
136000
7
122987.4
12000
172000
15000
151000
8
126677
12000
184000
18000
169000
9
130477.3
12000
196000
20000
189000
10
134391.6
12000
208000
21000
210000
11
138423.4
12000
220000
21000
231000
12
142576.1
12000
232000
21000
252000
13
146853.4
12000
244000
21000
273000
14
151259
12000
256000
21000
294000
15
155796.7
12000
268000
21000
315000
16
160470.6
12000
280000
21000
336000
17
165284.8
12000
292000
21000
357000
18
170243.3
12000
304000
20000
377000
19
175350.6
12000
316000
18000
395000
20
180611.1
12000
328000
15000
410000
21
186029.5
12000
340000
N/A

22
191610.3
12000
352000
N/A

23
197358.7
12000
364000
N/A



* Both CHGS and GPGB will take less than 10 years to make what and FD will make in 23 years (assuming CPO is trading at current market price).
*CHGS and GPGB begins Year 1 with its principal added back to its interest because it is assumed that the growers plot can be re-sold at purchase price. GPGB guarantees a buyback of the growers plot after year 2016.

CHGS has a higher payoff than GPGB for the first 10 years of the scheme. However, it is worth noting that both programs kick off at different periods.

Investors would have missed out on CHGS because its offer period closed sometime in 2008. However, investors can still take opportunity of the GPGB as they are still conducting their sales. In my opinion, this is a great chance for investors to diversify their investment pool and be a direct planter (because this is the closest you get to, if you want to sit in the comfort of your own home) and investor to take advantage of Malaysia’s largest commodity export.

Further details can be found on:

1 comment:

  1. Thank you for sharing your thoughts. I truly appreciate your effort in sharing this informative articles. Very impressive and quite interesting for the readers. Good job.

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