RHB Research expects Palm Wood to have a lower cost base, since the biggest raw material cost is for a waste product which can be sourced directly from its own estates.
PETALING JAYA: IOI Corp Bhd
’s Gomali estate mill and Palm Wood plant in Johor is not expected to contribute significantly to the group earnings in the initial years.
However, it is anticipated to boost the group’s sustainability credentials.
The level of mechanisation at the estate and versatility and broad range of use of Palm Wood products could help customers boost their environmental, social and governance credentials.
RHB Research visited the plant recently and said it was excited at the prospects of the Palm Wood venture, given its sustainability qualifications.
The research house expects Palm Wood to have a lower cost base, since the biggest raw material cost is for a waste product which can be sourced directly from its own estates.
IOI has yet to set the pricing for its products but similar blockboard products from low-density timber species are currently selling at US$300-US$350 (RM1,389-RM1,621) per cubic metre.
It would take some time for IOI to build a clientbase and ramp up production, as these are new products which need to be tested by customers first.
This is why RHB Research does not expect this venture to contribute to earnings significantly in the initial years.
IOI is still one of its sector top picks, given its integrated business model, decent valuations and commitment to sustainability.
It maintains its “buy’’ call on the stock with a target price of RM4.35 a share.
IOI’s Gomali estate in Johor has 2,171 ha of planted oil palm land, while the Gomali mill has a capacity of 120 tonnes per hour.
Within the mill complex, there is also a biogas plant and effluent treatment plant (where methane gas is captured from palm oil mill effluent to generate electricity).
There is abundant fruit on the trees and management noted that there has been enough rainfall so production should spike up in the next six months.
IOI’s efforts at mechanisation with machines includes battery-operated cutters, which provides manpower savings of up to 20%, electric mechanical carts that are used for infield collection.
It also includes tractor grabber mainline and hooklifts which are used in mainline fresh fruit bunch (FFB) evacuation.
IOI has also digitised the grading of its FFB via an electronic plantation monitoring system in a handheld device.
On IOI’s Palm Wood facility in Segamat, it is the first in Malaysia and is an 80%- owned joint venture.
At the plant, the old palm oil trunks are converted into Palm Wood panels which are lightweight, fire retardant and a good insulator.
It can be used in the building, furniture and joinery industries. This RM160mil plant was built in 13 months
It is now 90% to 95% ready and will start commercial operations on July 1.
