30/10/2007 (The Star Online), Petaling Jaya - Plantation and civil engineering counter Astral Asia Bhd is likely to boost its plantation landbank by more than 10 times with its recent agreement to develop plantations in Myanmar costing about RM680mil.
A source close to the company said the deal was only at a memorandum of understanding stage and further studies were still being conducted.
High global crude palm oil (CPO) prices and a favourable margin in Myanmar were the main reasons for looking at entering the country, he said.
The deal would add 170,000 acres of plantation land to the 14,000 acres it currently manages.
On the political and economic risk factors of entering Myanmar at this time, he said Astral had been in talks with partners as early as May prior to the recent political protests.
“With the current high CPO prices, we were exploring various options to acquire plantation landbank in Indonesia and Myanmar. Production cost in Myanmar was 30% to 50% lower compared to Indonesia.
“The political unrest was beyond our prediction but we believed the political situation would improve over time,” he said.
The source said the company saw its role as providing development to Myanmar's plantation sector.
Astral would be providing some financing as well as technical expertise for the joint venture with partners Myanmar Combiz Services Co Ltd (MCB) and Green Future Co Ltd (GFC).
Astral would hold up to 85% in the venture while MCB and GFC would hold 7.5% each.
The plantation land located in the southern part of Myanmar would be developed over a period of 15 to 25 years.
Astral was also still in talks with partners in Indonesia to develop plantations in Kalimantan, said the source.
CPO physical prices reached a record high of RM3,000 per tonne for November South yesterday, buoyed by skyrocketing oil prices of US$93 per barrel.
Bernama quoted dealers as saying that the rising crude oil prices were an indication of the potentially higher demand for biofuel as an alternative fuel.
On the futures market, the January 2008 contract for CPO rose RM110 to a new high of RM2,910 per tonne.
On the company's other core business of civil engineering business, he said it had a current order book of about RM80mil to RM100mil, which was relatively low compared with the boom years when the order book had reached RM300mil.
Astral had on Oct 18 announced that it had received government approval from the authorities to develop the Kuantan Hi-Tech Park worth RM2.8bil on the plantation land it owns.